Question

Carmen Richter, the cost accountant for Hiland Power Machines, recently installed activity-based costing at Hiland's Miami riding mower plant where three models---the 8-horsepower Lightening Bolt, the, the 12-horsepower Speed Demon, and the 18-horsepower, Zinger--are manufactured. Carmen's new product costs for these three models show that the company's traditional costing system had been significantly undercosting the 18-horsepower Zinger. This was due primarily to the lower sales volume of the Zinger compared to the Lightening Bolt and the Speed Demon.

Before completing her analysis and reporting these results to management, Carmen is approached by her friend Elias Glean, who is the production manager for the 18-horsepower Zinger model. Elias has heard from one of Carmen's staff about the new product costs and is upset and worried for his job because the new costs show the Zinger to be losing, rather than making money.

At first, Elias condemns the new cost system, where upon Carmen explains the practice of activity-based costing and why it is more accurate than the company's present system. Even more worried now, Elias begs Carmen, "Massage the figures just enough to save the line from being discontinued. You don't want me to lose my job, do you? Anyway, nobody will know."

Carmen holds firm but agrees to recompute all of her calculations for accuracy before submitting her costs to management.

1. Who are the stakeholders in this situation?
2. What, if any, are the ethical considerations in this situation?
3. What are Carmen's ethical obligations to the company? To her friend?

Answer 1

A.The Stakeholders are in this situation are:-

1.EMPLOYEES:-

Since this change will reassess the expense of item and it might prompt suspension of product offering along these lines affecting the well creatures of employees associated with that unit.

2.STOCKHOLERS:-

Since new framework will compute progressively precise expense of the item and misfortune making item will be stopped. This will enhance return of investors.

3.CUSTOMERS:-

Since expense of item may go up or down or item might be stopped, in this manner this will affect the clients.

B.Ethical consideration in this circumstance is taking a choice between stopping of misfortune making product offering or ensuring the occupations or prosperity of workers who may endure in view of cessation of misfortune making product offering.

C.

Carmen's ethical commitment to the organization is to speak to the information effectively and do the investigation of productivity of product offering dependent on right and exact designation of backhanded expense. Likewise he should likewise show an examination for effect on the organization for cessation of any misfortune making product offering Carmen's moral commitment to his companion is to shield his activity from the cessation of product offering.

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