Question
CASE II Curtis Rich, the cost accountant for Hi-Power Mower Company, recently installed activitybased costing at Hi-Powers St. Louis lawn tractor (riding mower) plant where
CASE II Curtis Rich, the cost accountant for Hi-Power Mower Company, recently installed activitybased costing at Hi-Powers St. Louis lawn tractor (riding mower) plant where three modelsthe 8- horsepower Bladerunner, the 12-horsepower Quickcut, and the 18-horsepower Supercutare manufactured. Curtiss new product costs for these three models show that the companys traditional costing system had been significantly undercosting the 18-horsepower Supercut. This was due primarily to the lower sales volume of the Supercut compared to the Bladerunner and the Quickcut. Before completing his analysis and reporting these results to management, Curtis is approached by his friend Ed Gray, who is the production manager for the 18-horsepower Supercut model. Ed has heard from one of Curtiss staff about the new product costs and is upset and worried for his job because the new costs show the Supercut to be losing, rather than making, money. At first, Ed condemns the new cost system, whereupon Curtis explains the practice of activitybased costing and why it is more accurate than the companys present system. Even more worried now, Ed begs Curtis, Massage the figures just enough to save the line from being discontinued. You dont want me to lose my job, do you? Anyway, nobody will know. Curtis holds firm but agrees to recompute all his calculations for accuracy before submitting his costs to management.
Instructions:
(a) Who are the stakeholders in this situation?
(b) What, if any, are the ethical considerations in this situation?
(c) What are Curtiss ethical obligations to the company? To his friend?
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