Description: Ethical Issue 19-1

Cassidy Manning is assistant controller at LeMar Packaging, Inc., a manufacturer of cardboard boxes and other packaging materials. Manning has just returned from a packaging industry conference on activity-based costing. She realizes that ABC may help LeMar meet its goal of reducing costs by 5% over each of the next three years.

LeMar Packagings Order Department is a likely candidate for ABC. While orders are entered into a computer that updates the accounting records, clerks manually check customers credit history and hand-deliver orders to shipping. This process occurs whether the sales order is for a dozen specialty boxes worth $80 or 10,000 basic boxes worth $8,000.

Manning believes that identifying the cost of processing a sales order would justify (1) further computerization of the order process and (2) changing the way the company processes small orders. However, the significant cost savings would arise from elimination of two positions in the Order Department. The companys sales order clerks have been with the company many years. Manning is uncomfortable with the prospect of proposing a change that will likely result in terminating these employees.

Requirements:

Use the IMAs ethical standards (see Chapter 16) to consider Mannings responsibility when cost savings come at the expense of employees jobs. Explain