Ethical Issue Cassidy Manning isassistant controller at LeMar Packaging, Inc., a

Question

Ethical Issue

Cassidy Manning isassistant controller at LeMar Packaging, Inc., a manufacturer ofcardboard boxes and other packaging materials. Manning has justreturned from a packaging industry conference on activity-basedcosting. She realizes that ABC may help LeMar meet its goal ofreducing costs by 5% over each of the next three years.

LeMar Packaging’sOrder Department is a likely candidate for ABC. While orders areentered into a computer that updates the accounting records, clerksmanually check customers’ credit history and hand-deliverorders to shipping. This process occurs whether the sales order isfor a dozen specialty boxes worth $80, or 10,000 basic boxes worth$8,000.

Manning believes thatidentifying the cost of processing a sales order would justify (1)further computerization of the order process and (2) changing theway the company processes small orders. However, the significantcost savings would arise from elimination of two positions in theOrder Department. The company’s sales order clerks have beenwith the company many years. Manning is uncomfortable with theprospect of proposing a change that will likely result interminating these employees.

Requirements

Use the IMA’sethical standards to consider Manning’s responsibility whencost savings come at the expense of employees’ jobs.


(Horngren. Accounting, 7th Edition. Pearson Custom Publishing28.12.2).

Explanation / Answer

Cassidy has a certain responsibility towards the company. If her suggestions result in significant cost changes,they should be implemented. As for the clerks , since they have gained the trust of the company with many years of hard work, their experience can be put to good use in the new set up. However,even there, if they have to be kept idle,they can be relocated to another branch where their services would be of much utility. This would solve both the problems at the same time.

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