Question

In: Accounting

Ethical Considerations Objective 3 Lindell Manufacturing embarked on an ambitious quality program that is centered on...

Ethical Considerations

Objective 3

Lindell Manufacturing embarked on an ambitious quality program that is centered on continual improvement. This improvement is operationalized by declining quality costs from year to year. Lindell rewards plant managers, production supervisors, and workers with bonuses ranging from $1,000 to $10,000 if their factory meets its annual quality cost goals.

Len Smith, manager of Lindell's Boise plant, felt obligated to do everything he could to provide this increase to his employees. Accordingly, he has decided to take the following actions during the last quarter of the year to meet the plant's budgeted quality cost targets:

  1. Decrease inspections of the process and final product by 50% and transfer inspectors temporarily to quality training programs. Len believes this move will increase the inspectors' awareness of the importance of quality; also, decreasing inspection will produce significantly less downtime and less rework. By increasing the output and decreasing the costs of internal failure, the plant can meet the budgeted reductions for internal failure costs. Also, by showing an increase in the costs of quality training, the budgeted level for prevention costs can be met.

  2. Delay replacing and repairing defective products until the beginning of the following year. While this may increase customer dissatisfaction somewhat, Len believes that most customers expect some inconvenience. Besides, the policy of promptly dealing with customers who are dissatisfied could be reinstated in 3 months. In the meantime, the action would significantly reduce the costs of external failure, allowing the plant to meet its budgeted target.

  3. Cancel scheduled worker visits to customers' plants. This program, which has been very well received by customers, enables Lindell workers to see just how the machinery they make is used by the customer and also gives them first-hand information on any remaining problems with the machinery. Workers who went on previous customer site visits came back enthusiastic and committed to Lindell's quality program. Lindell's quality program staff believes that these visits will reduce defects during the following year.

Required:

  1. Evaluate Len's ethical behavior. In this evaluation, consider his concern for his employees. Was he justified in taking the actions described? If not, what should he have done?

  2. Assume that the company views Len's behavior as undesirable. What can the company do to discourage it?

  3. Assume that Len is a CMA and a member of the IMA. Refer to the ethical code for management accountants in Chapter 1. Were any of these ethical standards violated?

Solutions

Expert Solution

No he did not validate in the conclusions taken above as he could have anxieties about the ethical value and standards which must to be upheld while creating managerial decision, Customer is the king and he should not displease them at any cost.

If the company interpretes Len's judgment and conduct as objectionable, then company can discourage all his decisions by :

  • Initiate the examination procedure by calling back the inspectors from training and give them a training on a distinct time note on the significance of quality.
  • employ the slated workers on the calls to the customer again.
  • instant substituting and fixing faulty products

If Len is a CMA of the company and the member of the IMA too, then the many of the moral codes is dishonoured here by Len, mentioned in the chapter 1, the ethical standards included in the chapter 1 involves which bounds the top management to work or take decisions which does not disgruntles the employees and customers.

Explanation:

Len Smith, manager of Lindell's Boise plant, focuses on the financial health and cost productivity of products rather than for moral standards and ideals,as he :

  • reduces reviews of the process and final product by 50% and transfer inspectors provisionally to quality training program for the purpose of refining the inspector's consciousness about the significance of quality but this comprises an ethical predicament because it might displeases the employees and other workers
  • he postpones substituting and mending faulty products until the beginning of the following year for the purpose of reducing the costs of external failure but this judgment might displease the customers, this is an moral issue that some customer can assume such awkwardness, so he is taking unjustified advantage of this situation.
  • Cancel scheduled worker visits to customers' plants, this will introduce time efficiency in the system and avoid time lagging but again such a decision without the proper confirmation of the top management of the company determinate the ethical behavior of the Len as irresponsible towards the employers

No he did not justify in the decisions taken above because he could have concern about the ethical value and standards which must to be maintained while making managerial decision, Customer is the king and he should not dissatisfy them at any cost.

If the company views the Len's decision and behaviour as unwanted, then company can disappoint all his decisions by :

  • Start the inspection process by calling back the inspectors from training and give them a training on a separate time note on the importance of quality.
  • employ the scheduled workers on the visits to the customer again.
  • immediate replacing and repairing defective products

Related Solutions

As part of the quality-control program for a catalyst manufacturing line, the raw materials (alumina and...
As part of the quality-control program for a catalyst manufacturing line, the raw materials (alumina and a binder) are tested for purity. The process requires that the purity of the alumina is to be 85%. A random sample from a recent shipment of alumina yielded the following results (in %):            93.2               87.0               92.1                      90.1               87.3               93.6 a) Test the requirements of the catalyst manufacturing line using the appropriate hypothesis test (assume a=0.05). b) Verify your result in part...
List at least 3 elements of a quality assurance (QA) program and discuss why they are...
List at least 3 elements of a quality assurance (QA) program and discuss why they are important. (via Sterile Processing for Pharmacy Technicians (0th Edition) )
ONLY QUESTION 3 - PLEASE PROVIDE DETAILED INSTRUCTIONS Quality Improvement and Profitability Objective Gagnon Company reported...
ONLY QUESTION 3 - PLEASE PROVIDE DETAILED INSTRUCTIONS Quality Improvement and Profitability Objective Gagnon Company reported the following sales and quality costs for the past four years. Assume that all quality costs are variable and that all changes in the quality cost ratios are due to a quality improvement program.    Year      Sales Revenues Quality Costs as a Percent of Revenues 1 $19,200,000           20% 2 20,800,000           17    3 24,320,000           13    4 25,420,000           9    Required: 1. Compute the quality costs for all...
WRITE OBJECTIVE FUNCTION AND CONSTRAINTS. A soft drink manufacturing company has 3 factories—one in Orlando, one...
WRITE OBJECTIVE FUNCTION AND CONSTRAINTS. A soft drink manufacturing company has 3 factories—one in Orlando, one in Tampa, and one in Port St. Lucie—which supply soft drink bottles to 3 warehouses located in the city of Miami. The associated per-unit transportation cost table is provided below.                                            Transportation Costs ($) Factories/Warehouse (W) W1 W2 W3 Orlando 4 3 7 Tampa 7 6 4 Port St. Lucie 3 6 6 The factory in Orlando has a capacity of 15,000 units. The...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT