Provide a narrative on how you would handle the following situation with which y

Question

Provide a narrative on how you would handle the following situation with which you are confronted. Prepare the essay in good form.

The day after your meeting where you explained what Manufactured Overhead Applied was and why it was added to the product cost, Payton calls you into his office. He did not say what he wanted to talk about. You lightly knock on his door and he tells you to come in and to shut the door. He starts talking to you very sincerely… “you know I always wanted to go to a Super Bowl Game but I never could make it to one. You know that Thom Brady guy I fired used to brag to me all the time that he went to the Super Bowl many times. He would always tell how much fun he and his buddy, some guy named Billy (not Bill) Belichick would have at the games. I never did like that Brady guy! Anyway my favorite team the New England Patriots are going to play in the Super Bowl next week. I found someone who will sell me two tickets for $10,000 so that I can take my brother Petrick (not Patrick). I feel sorry for him because he is a CPA and does not get to do anything fun. So I wrote a check for the tickets and I want you to record the transaction as Manufacturing Overhead. Now that you explained to me about Manufacturing Overhead I understand that the cost of the tickets will be applied to the cost of the jobs and nobody will notice. Payton tells you that this matter must remain strictly confidential and not to say anything to anyone. You get up to leave and on the way back to your desk you start thinking about the directive you just received.

1. You think to yourself… Well since it is his company he is not really stealing money from anyone. By putting the cost into Manufacturing Overhead the cost will be distributed to many different jobs. And the selling price of the jobs is based on a markup of cost so the Company will not lose profit when the jobs are sold.

a. What is the accounting impact of doing what Payton told you to do?

b. Would anyone outside of the company be impacted? If so who and how?

c. What if any ethical dilemma exists?

2. Include your comments to the following prompts:

a. Explain what you would do in this situation.

b. How would you deal with the fact that the directive came from the owner of the company?

c. Who (if anybody) would you go to help you resolve this matter?

Explanation / Answer

The directive received from the owner is unethical and detrimental to the interests of the cmpany. The accounting impact of this decision is that the additional cost of $ 10000 will get added to the manufacturing overhead and will be included in the cost of production. However in doing so the total cost of goods manufactured will be inflated by the aforementioned amount and so will be the selling price which is a markup on the cost. This will make the product uncompetitive in the market and the company will lose customers.

There will be no effect on the market or on anybody outside the company as buyers will buy products from competitors.

The transaction will come to light during the audit of financial statements and will create problems for the entity.

The owner should be convinced about the negative impact of the transaction.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.