Instyle Interior Designs has been requested to prepare a bid to decorate four model homes for a new development. Winning the bid would be a big boost for sales representative Jim Doogan, who works entirely on commission. Sara Groom, the cost accountant for Instyle, prepares the bid based on the following cost information: Design costs S20,000 70,000 0,000 20,000 Design costs Furniture and artwork Direct labor Delivery and installation Overhead costs Design software Furniture handlin General and administration 8.000 5.200 4.800 Total overhead costs 18,000 Full product costs Based on the company policy of pricing at 120% of full cost, Groom gives Doogan a figure of $165,600 to submit for the job. Doogan is very concerned. He tells Groom that at that price, Instyle has no chance of winning the job. He confides in her that he spent $600 of company funds to take the developer to a basketball playoff game where the developer disclosed that a bid of $156,000 would win the job. He hadn't planned to tell Groom because he was confident that the bid she developed would be below that amount. Doogan reasons that the S600 he spent will be wasted if Instyle doesn't capitalize on this valuable information. In any case, the company will still make money if it wins the bid at $156,000 because it is higher than the full cost of $138,000 Assume you a member of the cost accounting team. Prepare a memo to the company's CFO, Ricki Flag, discussing the situation and, specifically, the following considerations. Is the $600 spent on the basketball tickets relevant to the bid decision? Why or why not? Evaluate whether Groom's suggestion to Doogan to use the developer's tip is unethical. Groom suggests that if Doogan is willing to use cheaper furniture and artwork, he can achieve a bid of $156,000. The designs have already been reviewed and accepted and cannot be changed without additional cost, so the entire amount of reduction in cost will need to come from furniture and artwork. Would it be unethical for Doogan to reduce the cost of furniture and artwork to arrive at a lower bid? Why or why not? What steps should be taken to resolve this situation? 1. 2. 3