Atie Company produces plastic consumer products. Data for Atie Company from its 2019 income statement are shown below: Revenues $5,000,000 Variable costs 3,000,000 Fixed costs 2,500,000 Operating income $ (500,000) Sofia Brown, Aties president, is worried about Atie Companys low profitability. She asks Victoria Gallagher, production manager, and Joshua Noto, controller, to create ways to decrease costs. After ten days, Victoria suggests decreasing variable costs to 50% of revenues by reducing the costs that Atie currently incurs for safe disposal of wasted plastic. Joshua is worried that reducing this cost would expose the company to potential environmental liabilities. He tells Victoria, We would need to estimate the potential environmental liability costs and include them in our proposal. You cant do that, Victoria replies. We may have to incur environmental liability costs in the future, but its important for this proposal to go through. Otherwise, we may have to go bankrupt and lose our jobs. Required:

1. Compute Atie Companys breakeven revenues if variable costs are 50% of revenues.

2. Is Victorias proposal to incorrectly report environmental costs ethical? Provide arguments that support your view. In assessing the situation, consider the specific standards listed in Institute of Management Accountants (IMA) Statement of Ethical Professional Practice (described in Exhibit P-6 on page 11).