Possible Actions by employee options
Possible reason for action options
Sunto Scientific manufactures GPS devices for a chain of retail stores. (Click the icon to view information about the Magellan XS.) The budgeted and actual amounts for Magellan XS for July 2020 were as follows: Its most popular model, the Magellan XS, is assembled in a dedicated facility in Savannah, Georgia. Sunto is keenly aware of the competitive threat from smartphones that use Google Maps and has put in a standard cost system to manage production costs of the Magellan XS. It has also implemented a just-in-time system so the Savannah facility operates with no inventory of any kind. Producing the Magellan XS involves combining a navigation system (imported from Sunto's plant in Dresden at a fixed price), an LCD screen made of polarized glass, and a casing developed from specialty plastic. More info The controller of the Savannah plant, Jim Williams, is disappointed with the standard costing system in place. The standards were developed on the basis of a study done by an outside consultant at the start of the year. Williams points out that he has rarely seen a significant unfavorable variance under this system. He observes that even at the present level of output, workers seem to have a substantial amount of idle time. Moreover, he is concerned that the production supervisor, John Kelso, is aware of the issue but is unwilling to tighten the standards because the current lenient benchmarks make his performance look good. Data table Requirement 1. Compute the price and efficiency variances for the three categories of direct materials and for direct manufacturing labor in July 2020 . Begin by calculating the the price and efficiency variances for the each category of direct materials. (Do not round intermediary calculations. Round the amount you enter into the input field to the nearest whole dollar. Label each variance as favorable (F) or unfavorable (U). For variances with a $0 balance, make sure to enter "0" in the appropriate field. If the variance is zero, do not select a label. Abbreviation used: Qty = quantity.) Calculate the the price and efficiency variances for the direct labor. (Do not round intermediary calculations. Round the amount you enter into the input field to the nearest whole dollar. Label each variance as favorable (F) or unfavorable (U). For variances with a $0 balance, make sure to enter "0" in the appropriate field. If the variance is zero, do not select a label.) Requirement 2. Describe the types of actions the employees at the Savannah plant may have taken to reduce the accuracy of the standards set by the outside consultant. Why would employees take those actions? Is this behavior ethical? First select the types of actions that may have been taken by the employees. Adding steps that are not necessary in working on a GPS unit Creating defects in units so that the budgeted amount of average rework will be overstated Creating problems so that budgeted amount of average downtime and rates of spoilage of materials will be overstated Ignore defects in units so that the budgeted average rework will be understated Ignore problems so that the budgeted average downtime and rates of materials spoilage will be understated Taking less time on each step than is necessary Taking more time on each step than is necessary Removing steps that are necessary in working on a GPS unit They are working to increase the profits of the business by producing favorable variances. They believe that this is the best approach to improve the profit margin of the product. They have a "them versus us" mentality rather than a partnership perspective. They may be paid on a piece-rate basis with incentives for above-budgeted production. They may be paid on a salary basis with no incentive for above-budgeted production. They may want to create a relaxed work atmosphere, and a less-demanding standard can reduce stress. They may want to gain the benefits that ensue from superior performance without putting in the extra effort required. They may want to speed up production to minimize the hours on the job. A. No, Williams's behavior does not violate any of the standards of ethical conduct. B. Yes, Williams's behavior violates the standard of credibility. C. Yes, Williams's violates the standard of confidentiality. D. Yes, Williams's behavior violates the standard of integrity. E. Yes, Williams's behavior violates the standard of competence. Requirement 4. What actions should Williams take? A. Williams is not required to take any action as his behavior does not violate any of the standards of ethical conduct. B. Williams should discuss the situation with Kelso and point out that the standards are lax and that this practice is unethical. If Kelso does not agree to change, Williams should escalate the issue up the hierarchy in order to effect change. If organizational change is not forthcoming, Williams should be prepared to resign rather than compromise his professional ethics. C. Williams should not take any action because reporting the unethical behavior would be a violation of the confidentiality and integrity standards. D. Williams should discuss the situation with Kelso and point out that the standards are lax and that this practice is unethical. If Kelso does not agree to change, Williams is not obligated to take any further action and his professional ethics will not be compromised. Requirement 5. Williams can obtain benchmarking information about the estimated costs of Sunto's competitors such as Garmin and TomTom from the Competitive Intelligence Institute (CII). Discuss the pros and cons of using the ClI information to compute the variances in requirement 1 . (If an input field is not used in the table leave the input field empty; do not select a label.)
