In conducting interviews and observing factory operations to implement an activity-based costing system, you determine that several activities are unnecessary or redundant. For example, warehouse personnel were inspecting purchased components as they were received at the loading dock. Later that day, the components were inspected again on the shop floor before being installed in the final product. Both of these activities caused costs to be incurred but were not adding value to the product. If you include this observation in your report, one or more employees who perform inspections will likely lose their jobs.

Discussion points:

• As a plant employee, what is your responsibility to report your findings to superiors?
• Should you attempt to determine if the redundancy is justified? Explain.
• What is your responsibility to the employees whose jobs will likely be lost because of your report?
• What facts should you consider before making your decision to report or not?

(Chapter 17 Ethics Challenge BTN 17-3, Financial & Managerial Accounting: Information for Decisions; Wild, Shaw, and Chiapetta, 7th edition, McGraw-Hill )