Ethics and professional conduct in business
Erin Haywood was recently hired as a cost analyst by Wind River Medical Supplies Inc. Oneof Erin’s first assignments was to perform a
storage space is needed. Zuhair asks Erín into his office and the following conversation
takes place:
ZubairErín, you’re new here, aren’t you?
EHii: Yes, sir.
Zubair: V.dl, Erin, let me tell you something. ¡m not at all pleased with the capital investment
analysis that you performed on this new warehouse. T need that warehouse for my production.
If I dont get it, where am I going to place our output?
Erín: Hopefully with the customer, sir.
Zithair: Now don’t get smart with me.
Erín: No, really. I was being serious. My analysis does not support constructing a new ware-
house. The numbers don’t lie: the warehouse does not meet our investment return targets.
In fact, it seems to me that purchasing a warehouse dots not add much value to the business.
We need to be producing product to satisfy customer orders, not to fill a warehouse.
Zubair Listen, you need to understand sonwthing. The headquarters people will not allow mv
to build the warehouse if the numbers dont add up. You know as well as I that many assump
tions go into your net present value analysis. Why don’t you relax some of your assumptions so
that the f́nancial savings will offset the cost?
Erín: I’m willing to discuss my assumptions with you. Maybe I overlooked something.
Zubafr Good. Here’s what I want you to do. 1 see in your analysis tha you don’t project
greater sales as a result of the warehouse. It seems to me, if we can store more goxLs, then
will have more to sell. Thus, logically, a larger warehouse translates into more sales. If you
incorporate this into your analysis, I think you’ll see that the numbers will work out. Why
don’t you work it through and come back with a new analysis? I’m really counting on you
on this one. Let’s get off to a good start together and see if we can get this project accepted.
What is your advice to Erin?
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Survey of Accounting (Accounting I)
- Assume you are the manager for the semi-trucks division at the Speedy Delivery Company. The semi-truck division is a cost center and you are reviewing the driver overtime costs for the previous year, shown here: A. Microsoft Excel or another spreadsheet application, create a line chart with markers showing the driver overtime expense. Describe your observations. B. Knowing that safety is important in your industry and weather plays a significant role in the safety of drivers, you decide to talk with the safety manager and obtained the following information: Using Microsoft Excel or another spreadsheet application, create individual line charts with markers showing the average snowfall and non-company highway accidents. Describe your observations and actions you might consider.arrow_forwardSara has just taken a job as the middle school assistant principal for an area school district. Prior to Chis, she was a teacher. She has received the following performance measurements for her first administrative job. Her first order of business is to determine if these performance measurements are short-term goals or long-term goals based on her individual situation. She has completed her administrative degree but has not yet worked as an administrator. Identify each of the following goals as short term or long term. A. Conduct teacher walk-throughs/observations/evaluations for teachers of grades 6 and 7. B. Assist the districts mission in seeking to educate all youth in the school district. C. Train to become a building instructional leader. Act as building administrator in the absence of the principal. D. Attend meetings with building principals and the administrative team when called to do so. E. Engage all students in a meaningful way, and support teachers and staff in providing rigor and relevance. Success of school-wide discipline and attendance policies and enforcement depends on a combination of creativity and sound pedagogy while adhering to district, state, and federal law, guidelines, and regulations. F. Facilitate and supervise all federal- and state-mandated drills (fire, lockdowns, tornado, others). G. Dress professionally. H. Assist the building principal in all job duties and responsibilities.arrow_forwardCost Information and Ethical Behavior, Service Organization Jean Erickson, manager and owner of an advertising company in Charlotte, North Carolina, arranged a meeting with Leroy Gee, the chief accountant of a large, local competitor. The two are lifelong friends. They grew up together in a small town and attended the same university. Leroy is a competent, successful accountant but is having some personal financial difficulties after some of his investments turned sour, leaving him with a 15,000 personal loan to pay offjust when his oldest son is starting college. Jean, on the other hand, is struggling to establish a successful advertising business. She had recently acquired the rights to open a branch office of a large regional advertising firm headquartered in Atlanta, Georgia. During her first 2 years, she was able to build a small, profitable practice. However, the chance to gain a significant foothold in Charlotte hinged on the success of winning a bid to represent the state of North Carolina in a major campaign to attract new industry and tourism. The meeting she had scheduled with Leroy concerned the bid she planned to submit. Jean: Leroy, Im at a critical point in my business venture. If I can win the bid for the states advertising dollars, Ill be set. Winning the bid will bring 600,000 to 700,000 of revenues into the firm. On top of that, I estimate that the publicity will bring another 200,000 to 300,000 of new business. Leroy: I understand. My boss is anxious to win that business as well. It would mean a huge increase in profits for my firm. Its a competitive business, though. As new as you are, I doubt that youll have much chance of winning. Jean: Youre forgetting two very important considerations. First, I have the backing of all the resources and talent of a regional firm. Second, I have some political connections. Last year, I was hired to run the publicity side of the governors campaign. He was impressed with my work and would like me to have this business. I am confident that the proposals I submit will be very competitive. My only concern is to submit a bid that beats your firm. If I come in with a lower bid and good proposals, the governor can see to it that I get the work. Leroy: Sounds promising. If you do win, however, there will be a lot of upset people. After all, they are going to claim that the business should have been given to local advertisers, not to some out-of-state firm. Given the size of your office, youll have to get support from Atlanta. You could take a lot of heat. Jean: True. But I am the owner of the branch office. That fact alone should blunt most of the criticism. Who can argue that Im not a local? Listen, with your help, I think I can win this bid. Furthermore, if I do win it, you can reap some direct benefits. With that kind of business, I can afford to hire an accountant, and Ill make it worthwhile for you to transfer jobs. I can offer you an up-front bonus of 15,000. On top of that, Ill increase your annual salary by 20%. That should solve most of your financial difficulties. After all, we have been friends since day oneand what are friends for? Leroy: Jean, my wife would be ecstatic if I were able to improve our financial position as quickly as this opportunity affords. I certainly hope that you win the bid. What kind of help can I provide? Jean: Simple. To win, all I have to do is beat the bid of your firm. Before I submit my bid, I would like you to review it. With the financial skills you have, it should be easy for you to spot any excessive costs that I may have included. Or perhaps I included the wrong kind of costs. By cutting excessive costs and eliminating costs that may not be directly related to the project, my bid should be competitive enough to meet or beat your firms bid. Required: 1. What would you do if you were Leroy? Fully explain the reasons for your choice. What do you suppose the code of conduct for Leroys company would say about this situation? 2. What is the likely outcome if Leroy agrees to review the bid? Is there much risk to him personally if he reviews the bid? Should the degree of risk have any bearing on his decision?arrow_forward
- John Biggs and Patty Jorgenson are both cost accounting managers for a manufacturing division. During lunch yesterday, Patty told John that she was planning on quitting her job in three months because she had accepted a position as controller of a small company in a neighboring state. The starting date was timed to coincide with the retirement of the current controller. Patty was excited because it allowed her to live near her family. Today, the divisional controller took John to lunch and informed him that he was taking a position at headquarters and that he had recommended that Patty be promoted to his position. He indicated to John that it was a close call between him and Patty and that he wanted to let John know personally about the decision before it was announced officially. Required: What should John do? Describe how you would deal with his ethical dilemma (considering the IMA code of ethics in your response).arrow_forwardAssume you have just taken a position as controller for a new company that manufactures and sells wrought iron wall hangings. Although the founder of the company, who is the president and CEO, is a great artisan, she has very limited knowledge of accounting. Instructions To help your new boss better understand accounting for a manufacturing organization, prepare a response to her in which you: (1) identify, (2) describe, and (3) provide examples of the three manufacturing costs and the three inventory accounts used in accounting for a manufacturing company.arrow_forwardSuppose that you have been given a summer job as an intern at Issac Aircams, a company that manufacturessophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which isprivately owned, has approached a bank for a loan to help it finance its growth. The bank requires financialstatements before approving such a loan. You have been asked to help prepare the financial statements andwere given the following list of costs:1. Depreciation on salespersons’ cars.2. Rent on equipment used in the factory.3. Lubricants used for machine maintenance.4. Salaries of personnel who work in the finished goods warehouse.5. Soap and paper towels used by factory workers at the end of a shift.6. Factory supervisors’ salaries.7. Heat, water, and power consumed in the factory.8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.)9. Advertising costs.10. Workers’ compensation insurance for factory employees.11. Depreciation on chairs…arrow_forward
- Suppose that you have been given a summer job as an intern at Issac Aircams, a company that man- ufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs: Depreciation on salespersons’ cars. Rent on equipment used in the factory. Lubricants used for machine maintenance. Salaries of personnel who work in the finished goods warehouse. Soap and paper towels used by factory workers at the end of a shift. Factory supervisors’ salaries. Heat, water, and power consumed in the factory. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) Advertising costs. Workers’ compensation insurance for factory employees. Depreciation on…arrow_forwardB-You is a consulting firm that works with managers to improve their interpersonal skills. Recently, a representative of a high-tech research firm approached B-You's owner with an offer to contract for one year with B-You to improve the interpersonal skills of a newly hired manager. B-You reported the following costs and revenues during the past year (before the proposed contract). Sales revenue Costs Labor Equipment lease B-YOU Annual Income Statement Rent Supplies Officers' salaries Other costs Total costs Operating profit (loss) $ 560,000 260,000 42,000 35,000 30,000 160,000 20,000 $ 547,000 $ 13,000 If B-You decides to take the contract to help the manager, it will hire a full-time consultant at $85,500. The equipment lease will increase by 20 percent. Supplies will increase by an estimated 10 percent and other costs by 15 percent. The existing building has space for the new consultant. No new offices will be necessary for this work.arrow_forwardYou are the accountant for the Best Outdoor Living company which manufactures various outdoor furniture. The furniture is sold by specialty stores and through internet outlets. You are responsible for reviewing costs and creating standards costs based on the information you have reviewed. One of your former colleagues has recently started a company to collect and sell data on industry benchmarks. You are offered the chance to receive benchmarks from other outdoor furniture companies for free if you will provide the standard and actual costs for the last three years of your company. As creation of the standards is a tedious process, you feel this data would be helpful in your job. Review the IMA’s ethical guidelines, under Reading Preparation and identify the conflict with the guidelines. What are the relevant factors in this situation and how you should handle this, and what you would recommend to the Controllerarrow_forward
- Shanice works in finance for a small manufacturing company and is working on next year’s budget. She has been doing research to compare the cost of outsourcing some upcoming jobs versus the cost of purchasing the equipment to keep the jobs in-house. In what step in financial planning is Shanice involved? Multiple Choice O. developing financial statements for outside investors O. forecasting short-term financial needs O. establishing financial controls and tax policy O. forecasting long-term financial needsarrow_forwardPenny is compiling a list of costs incurred so far on a project. She must categorize these costs so that she can present the amount of direct cost incurred. Which of the following should Penny include in this list?This type of question contains radio buttons and checkboxes for selection of options. Use Tab for navigation and Enter or space to select the option. option A Expense incurred in meeting the regulatory standards for the company option B Benefits for employees in the organization option C Travel expenses to the customer’s office option D Costs incurred for maintaining coffee stations around the office.arrow_forward3. Jenna Suarez, the controller for Arben Company, has faced the following situations in the past two weeks:a. Ben Heald, head of production, wondered whether it would be more cost effective to buy parts partially assembled or to buy individual parts and assemble them at the Arben factory.b. The president of Arben reminded Jenna that the stockholders’ meeting was coming up, and he needed her to prepare a PowerPoint presentation showing the income statement and balance sheet information for last year.c. Ellen Johnson, vice president of sales, has decided to expand the sales offices for next year. She sent Jenna the information on next year’s rent and depreciation information for budgeting purposes.d. Jenna’s assistant, Mike, received the information from Ellen on depreciation and added it to depreciation expenses and accumulated depreciation on office equipment.e. Jenna compared the budgeted spending on materials used in production with the actual spending on materials used in…arrow_forward
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