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Week 3 DQ Ethical Issue

Introduction to Managerial Accounting. From Chapter 16, Ethical Issue 16-1.

Job Order and Process Costing. Manufacturers use three inventory accounts. Name each one and explain what costs each contain

Ethical Issue 16-1

Becky Knauer lately resigned from her job as controller for Shamalay Automotive, a small, struggling overseas car seller in Upper   Saddle River, New Jersey. Becky has recently commenced a fresh career as controller for Mueller Imports, a significantly bigger seller for the same car producer. Requirement for this specific model of car is increasing, and the producer can't manufacture sufficient to meet requirement. The manufacturer’s local sales administrators are each provided a specific quantity of cars. Each sales administrator then determines the way to break up the cars among the separately managed dealers in the region. Due to higher requirement for these types of cars, dealers virtually all wish to get as many cars as they can from the local sales administrator. Becky’s previous company, Shamalay Automotive, gets just about 25 cars per month. For that reason, Shamalay wasn't highly profitable.

Becky is astonished to know that her fresh employer, Mueller Imports, gets more than 200 cars per month. Becky soon gets one more shock. Every few months, an area jeweler invoices the seller $5,000 for “miscellaneous services.” Franz Mueller, the proprietor of the dealership, personally grants payment of these bills, noting that every bill is a “selling expense.” From informal talks with a salesman, Becky knows that Mueller often gives Rolex watches to the manufacturer’s local sales administrator and other sales managers. Prior to speaking to anybody regarding this, Becky determines to work through her moral problem.

Requirements:

1. Put yourself in Becky’s place.

a. What is the ethical issue?

b. What are your options?

c. What are the possible consequences?

d. What should you do?

Manufacturers use three inventory accounts. Name each one and explain what costs each contain