04 May IDENTIFY THE RELEVANT FACTORS IN THE SITUATION, AND SUGGEST WHAT LANE SHOULD RECOMMEND TO THE CONTROLLER.
Rita Lane is the accountant for Outdoor Living, a manufacturer of outdoor furniture that is sold through specialty stores and Internet companies. Lane is responsible for reviewing the standard costs and making recommendations for adjustments to the controller. While reviewing the standards for the coming year, two ethical issues arise.Ethical Issue 1 Lane has been approached by Casey Henderson, a former colleague who worked with Lane when they were both employed by a public accounting firm. Henderson has recently started his own firm, Henderson Benchmarking Associates, which collects and sells data on industry benchmarks. He offers to provide Lane with benchmarks for the outdoor furniture industry free of charge if she will provide him with the past three years of Outdoor Living’s standard and actual costs. Henderson explains that this is how he obtains most of his firm’s benchmarking data. Lane always has a difficult time with the standard-setting process and believes that the benchmark data would be very useful.Requirements 1. Use the IMA’s ethical guidelines (www.imanet.org/PDFs/Statement%20of%20Ethics_web.pdf) to identify the ethical dilemma. 2. Identify the relevant factors in the situation, and suggest what Lane should recommend to the controller.Ethical Issue 2 Outdoor Living’s management is starting a continuous improvement policy that requires a 10% reduction in standard costs each year for the next three years. Dan Jacobs, manufacturing foreman of the Teak furniture line, asks Lane to set loose standard costs this year before the continuous improvement policy is implemented. Jacobs argues that there is no other way to meet the tightening standards while maintaining the high quality of the Teak line.Requirements 1. Use the IMA’s Statement of Ethical Professional Practice to identify the ethical dilemma. 2. Identify the relevant factors, and suggest what Lane should recommend to the controller.
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