Earnhart Manufacturing Company allows employees to purchase, at cost, manufacturing materials, such as metal and lumber, for personal use. To purchase materials for personal use, an employee must complete a materials requisition form, which must then be approved by the employees immediate supervisor. Gretchen MacCauley, an assistant cost accountant, charges the employee an amount based on Earnharts net purchase cost.

Gretchen MacCauley is in the process of replacing a deck on her home and has requisitioned lumber for personal use, which has been approved in accordance with company policy. In computing the cost of the lumber, Gretchen reviewed all the purchase invoices for the past year. She then used the lowest price to compute the amount due the company for the lumber.

-Discuss whether Gretchen behaved in an ethical manner.

-How would you handle this situation?

-Should there be a second signature or approval process for internal purchases?