You drive on it, walk on it, wear it, and even brush your teeth with it. What is it? Limestone. It's a versatile natural resource found in asphalt highways, concrete sidewalks, cosmetics and tooth-paste, to name a few things. Shamrock Inc. has been a primary supplier of quality limestone products since the mid- 1950s. Over the years, the company has seen many changes as its business and the local economy have matured. Considered a commodity, limestone rock is extracted from underground mines located 350 feet below the surface. Limestone used to be mined on the surface, but the supply of quality surface rock has been exhausted. Engineers estimate that millions of tons of quality limestone rock still remain to be mined underground.

Required

1. Do you agree with Shamrock Inc.' s use of a process- costing system? Why? Explain.

2. Why do you think Johnson was benchmarking one plant against another?

3. Why and how might plant managers manipulate their estimates of percentage of completion and limestone inventory?

4. Johnson's first reaction is to contact each plant controller and discuss the problem raised by the unsigned letters. Is that a good idea?

5. Assume that the plant controller's primary reporting responsibility is to the plant manager and that each plant controller receives the phone call from Johnson mentioned in requirement 4. What is the ethical responsibility of each plant controller to

(a) Eugene Johnson and

(b) to Shamrock Inc. when reporting the equivalent- unit information and limestone inventory each plant provides?

6. How might Johnson learn whether the equivalent unit and limestone inventory figures provided by particular plants are being manipulated?

7. What should Johnson do?