. Ethics and Standard Costs Farmer Frank’s produces items from local farm produc
ID: 2597253 • Letter: #
Question
. Ethics and Standard Costs
Farmer Frank’s produces items from local farm products and distributes them to supermarkets. Over the years, price competition has become increasingly important, so Susan Kramer, the company’s controller, is planning to implement a standard cost system for Farmer Frank’s. She asked her cost accountant, Margaret Chang, to gather cost information on the production of blueberry preserves (Farmer Frank’s most popular product). Margaret reported that blueberries cost $0.75 per quart, the price she intends to pay to her good friend who has been operating a blueberry farm that has been unprofitable for the last few years. Because of an oversupply in the market, the price for blueberries has dropped to $0.60 per quart. Margaret is sure that the $0.75 price will be enough to pull her friend’s farm out of the red and into the black.
Required
Is Margaret’s behavior regarding the cost information she provided to Susan unethical? Explain your answer.
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Explanation / Answer
Answer:
In this case behavior of Margaret is totally unethical. She is cost accountant of farmer frank and getting salary and other benefit from this company. There is an employer-employee relationship between Margaret and frank. In this case an assignment has been given in good faith and trust. Company trust on susan and Margaret so susan has given this to her.
She has not only break the trust of Susan but also her work is against the employer. To give undue benefit to her friend she has advised to her employer which may disturb financial health of the company. Through this financial health of frank may be fallen because one side there is a position of over supply in the market while other side $0.15 per price will be undue benefit to her friend. There will be direct loss to the frank and profit to her friend.
In this case Margaret should give standard price of $ 0.60 a fair price at which blue berries may be purchased and sold. She has not followed standard costing system so it is also against her profession. She has not followed to calculate standard costing system and give a price at which her friend may avail due benefit and come out from the red to the black.
In brief it is unethical for following reason:-
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