Question
Refer to the scenario located in the Analyze, Think, Communicate section 12-5 of Ch. 12, Job-Order, Process, and Hybrid Costing Systems of Fundamental Managerial Accounting
Refer to the scenario located in the "Analyze, Think, Communicate" section 12-5 of Ch. 12, "Job-Order, Process, and Hybrid Costing Systems" of Fundamental Managerial Accounting Concepts. This scenario involves an altercation between Rene Alverez and Bill Sawyer and requires you to weigh in with calculations and comments on the matter.
Read the scenario in the textbook and complete the activity below.
Compute the equivalent cost per unit, assuming the ending inventory is considered to be 40 percent complete.
Compute the equivalent cost per unit, assuming the ending inventory is considered to be 60 percent complete.
Write a 350-word summary of your calculations and findings. Comment on Mr. Sawyer's motives for establishing the percentage of completion at 60 percent rather than 40 percent.
Submit calculations and summary.
ATC 12-5 Ethical DilemmaAmount of equivalent units
Rene Alverez know she was in over her head soon after she took the job.Even so, the opportunity for promotion comes along rarely and she believed that she would grow into it.Ms. Alverez is the cost accounting specialist assigned to the finishing department of Standard Tool Company.Bill Sawyer, the manager of the finishing department, knows exactly what he is doing.In each of the three years he has managed the department, the cost per unit of product transferred out of his Work in Process Inventory account has declined.His ability to control cost is highly valued, and it is widely believed that he will be the successor to the plant manager, who is being promoted to manufacturing vice president.One more good year would surely seal the deal for Mr. Sawyer.It was little wonder that Ms. Alverez was uncomfortable in challenging Mr. Sawyer's estimate of the percentage of completion of the department's ending inventory.He contended that the inventory was 60 percent complete, but she believed that it was only about 40 percent complete.
After a brief altercation, Ms. Alverez agreed to sign off on Mr. Sawyer's estimate.The truth was that although she believed she was right, she did not know how to support her position.Besides, Mr. Sawyer was about to be named plant manager, and she felt it unwanted to challenge such an important person.
The department had beginning inventory of 5,500 unit of product and it started 94,500 units during the period.It transferred out 90,000 units during the period.Total transferred-in and production cost for the period was $902,400.This amount included the cost in beginning inventory plus additional costs incurred during the period.The target (standard) cost per unit is $9.45.
Required
a. Determine the equivalent cost per unit, assuming that the ending inventory is considered to be 40 percent complete.
b. Determine the equivalent cost per unit, assuming that the ending inventory is considered to be 60 percent complete.
c. Comment on Mr. Sawyer's motives for establishing the percentage of completion at 60 percent rather than 40 percent.
d. Assuming that Ms. Alverez is a certified management accountant, would informing the chief accountant of her dispute with Mr. Sawyer violate the confidentiality standards of ethical professional practice in Exhibit 1.17 of Chapter 1?
e. Did Ms. Alverez violate any of the standards of ethical professional practice in Exhibit 1.17 of Chapter 1?If so, which ones?
f. Discuss the components of the fraud triangle that affected Ms. Alverez's behavior.
EXHIBIT 1.17
Statement of Ethical Professional Practice
Members of IMA shall behave ethically.A commitment to ethical professional practice includes overarching principles that express out values, and standard that guide out conduct.IMA's overarching ethical principles include: Honesty, Fairness, Objectivity, and Responsibility.Members shall act in accordance with these principles and shall encourage others within their organizations to adhere to them.A member's failure to comply with the following standards may result in disciplinary action.
Competence Each member has a responsibility to
- Maintain an appropriate level of professional expertise by continually developing knowledge and skills.
- Perform professional duties in accordance with relevant laws, regulations, and technical standards.
- Provide decision support information and recommendations that are accurate, clear, concise, and timely.
- Recognize and communicate professional limitations or other constraints that would preclude responsible judgment or successful performance of an activity.
Confidentiality Each member has a responsibility to
- Keep information confidential except when disclosure is authorized or legally required.
- Inform all relevant parties regarding appropriate use of confidential information.Monitor subordinates' activities to ensure compliance.
- Refrain from using confidential information for unethical or illegal advantage.
Integrity Each member has a responsibility to
- Mitigate actual conflicts of interest and avoid apparent conflicts of interest.Advise all parties of any potential conflicts.
- Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
- Abstain from engaging in or supporting any activity that might discredit the profession.
Credibility Each member has a responsibility to
- Communicate information fairly and objectively.
- Disclose all relevant information that could reasonably be expected to influence an intended user's understanding of the reports, analyses, or recommendations.
- Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law.
Resolution of Ethical Conflict In applying these standards, you may encounter problems identifying unethical behavior or resolving an ethical conflict.When faced with ethical issues, follow your organization's established policies on the resolution of such conflict.If these policies do not resolve the ethical conflict, consider the following course of action:
- Discuss the issue with your immediate supervisor except when it appears that the supervisor is involved.In that case, present the issue to the next level.If you cannot achieve a satisfactory resolution, submit the issue to the next management level.Communication of such problems to authorities or individuals not employed or engaged by the organization is not considered appropriate, unless you believe there is a clear violation of the law.
- Clarity relevant ethical issues by initiating a confidential discussion with an IMA Ethics Counselor or other impartial advisor to obtain a better understanding of possible courses of action.
- Consult your own attorney as to legal obligations and rights concerning the ethical conflict.
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