Apex Art has been requested to prepare a bid on 500 pieces of framed artwork for
ID: 2798862 • Letter: A
Question
Apex Art has been requested to prepare a bid on 500 pieces of framed artwork for a new hotel. a big boost for sales representative Jason Grant, who works entirely on commission. Sonja Gomes, the cost accountant for Apex, prepared the bid and calculated full product Costs of S121,000. Based on the company policy of pricing at 125% of full cost, Gomes gives Grant a figure of $151,200 to submit for the job. Winning the bid would be Grant is very concermed. He tells Gomes that at that price, Apex has no chance of winning the job. He confides that he spent S500 of company funds to take the hotel's purchasing agent to a basketball playoff game where the purchasing agent disclosed that a bid of S145,000 would win the job. He hadn't planned to tell Gomes because he was confident that the bid she developed would be below that amount. Gomes reasons that the S500 he spent will be wasted if Apex doesnt capitalize on this valuable information. In any case, the company will still make money if it wins the bid at S145,000 because it is higher than the full cost of S121,000. Gomes suggests that if Grant is willing to use cheaper materials for the frame, he can achieve a bid of S145,000. The artwork has already been selected and cannot be changed, so the entire amount of the reduction in cost will need to come from framing materials BRIEFLY answer the following five questions: nState and describe the issues, if any, which may potentially violate ethical principles. a. Whose interests could be jeopardized due to the potential unethical behavior that you identified in 1)? b. Provide reasons why these stakeholders interests can be jeopardized. a. What is Gomes' rationale after Grant confides in her? b. Discuss the alternative courses of action that Gomes can take and the possible What should Gomes do, and why? Elaborate. sa. What can you conclude if Grant were to take Gomes suggestions, and what could be the consequences? b. What could be the possible consequences for taking the suggestion that youExplanation / Answer
1. Ethical principles will be violated if Apex artwork uses cheaper framing materials for the selected artwork to win the bid. Cheaper framing materials may result in damage of artwork in near future as the frame surely won't last long. Bidders are not supposed to know the lowest bid price which Apex has already indirectly obtained unethically to win the bid.
2. a) The hotel's intererst will be at stake if it chooses Apex art to buy the artwork from.
b) The hotel's interest will be jeopardized because cheaper framing materials used in artwork may result in damage of artwork in near future as the frame surely won't last long.
3. a) Gomes is suggesting grant to use cheaper material for framing the artwork to reduce the price of artwork to $145,000 since it is not possible to change the already selected artwork.
b) Gomes can rather choose to request the company board for a relaxation of profit policy. Instead of using a 125% of full cost pricing policy it can relax the policy a little bit to 120% for this particular contract. Compromising a little bit of profit for the sake of ethics will benefit the company in the long run and will create a lasting goodwill for Apex art.
It also needs to be seen why the selected artwork can't be changed considering that the selection has not been made by the Customer itself.
4. Already answered in 3. Gomes should request for a reduction of profit in this particular case since insider information has been obtained regarding the price of artwork.
5. a) Already given the answer in above question 1 and 2.
b) If Apex art goes for a reduction of profit and is able to reduce its bid price, it will manage to get the contract without compromising its ethics. This may also help Apex art in becoming a regular supplier for the hotel.
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