• What is the central ethical conflict in this case?
• How would you have responded to the conflict in question?
• What complications or "gray areas" do you identify?

Focus on Ethics BOGUS BONUS: SACRIFICING QUALITY TO CUT STANDARD COSTS Pressures to control costs, coupled with bonus systems based on adherence to standards, can present a temptation to engage In ethical lapses. The following hypothetical scenario describes such a situation. Keystone Company manufactures small wooden household Items such as cutting boards and knife racks. Keystone's controller, Marcella ngas, recently completed the Installation of a new standard-costing system, which has been In place now for six months. Jack Smith, the purchasing manager, is about to place an order for wood to be used in Keystone's cutting boards. Smith has found a supplier that will furnish the necessaryI wood at $2.00 per board foot, rather than the standard cost of $3.00. This Is very appealing to Smith, since his annual bonus ls inuenced by any favorable price variances he ls able to obtain. Smith is due to be transferred at the end of the year to Keystone's Phoenix Division, which manufactures metal kitchen utensils. The transfer is a promotion for Smith. After further discussions with the potential supplier, Smith realized that the wood being offered would not be well-suited for use in cutting boards. Although the wood would seem fine in the manufacturing process, and it would result in an attractive product, it would not hold up well over time. This particular type of wood, after repeated cycles of getting wet and then drying out, would tend to crack. Smith gured that it would take about a year for the cutting boards to deteriorate, and then Keystone Company would be beset with customer complaints. Smith mulled over the situation for a while and then decided to accept the new suppliers offer. The $2.00 price would help him get a nice annual bonus, which he could use to help with the down payment on a new home. By the time the cutting boards cracked and customers started to complain, he would be long gone. Someone else could won'y about the problem then, he reasoned. After all, he thought, people shouldn't expect a cutting board to last forever. Several weeks later, when the invoice for the first shipment of wood came through, ngas noticed the large, favorable price variance. When she ran Into Smith on the golf course, ngas congratulated Smith on the purchase. The following conversation resuhed. Rigas (C; "That was quite a price break on that wood, Jack. Hoard you swing It?" Smith {PM}: \"Hard-ball negotiating, Marcella. It's as simple as that.\" Rigas (C; "Is it good wood? And how about the supplier, Jack? 1ll'Iilll they deliver on time?" Smith {PM}: \"This supplier Is very timely In their deliveries. I made sure of that." Rigas (C; "How about the quality, Jack? Did you check into that?" Smith {PM}: 'Sure I did, Marcella. Hey, what Is this? An interrogation? I thoughtwe were here to playI golf." ngas was left feeling puzzled and disconcerted by Smith's evasiveness. The next day, ngas talked to the production manager, Nick Guerro, about her concerns. Later that day, Guerro raised the issue with SmithAfter a lengthy and sometimes heated exchange, the story came out