Aranguez Corporation produces a molded plastic casing, LX20A, for desktop computers. Summary data from its 2013 income statement are as follows:

Revenues	$ 8,000,000
Variable costs	(4,800,000)
Fixed costs	(3,000,000)
Operating income	$ 200,000

Jane Dall, Aranguezs president, is very concerned about Aranguez Corporations poor profitability. She asks Giselle James, production manager, and Lester Saline, controller, to see if there are ways to reduce costs.

After two weeks, James returns with a proposal to reduce variable costs to 50% of revenues by reducing the costs Aranguez currently incurs for safe disposal of waste plastic. Saline is concerned that this would expose the company to potential environmental liabilities. He tells James, We would need to estimate some of these potential environmental costs and include them in our analysis. You cannot do that, James replies. We are not violating any laws. There is some possibility that we may have to incur environmental costs in the future, but if we bring it up now, this proposal will not go through because our senior management always assumes these costs to be larger than they turn out to be. The market is very tough, and we are in danger of shutting down the company. We dont want all our colleagues to lose their jobs. The only reason our competitors are making money is because they are doing exactly what I am proposing.

REQUIRED:

1. identify THE ETHICAL QUESTION AND Describe how each concept in the IMAs Ethical Guidance applies to the ethical question presented here.
2. Describe what Lester Saline should do in response to Giselle James request.