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COST ACCOUNTING: ETHICAL ISSUES AND DECISION-MAKING

CASE 1: COST ALLOCATION: DECISION MAKING


1. How would you recommend Sunshine allocate the common costs between
drinks and pastries?
Answer:
Let them pursue their strategy,

CASE 2: ETHICAL ISSUES (CMA Adapted)


1. Does Dawn have an ethical responsibility to take a course of action?
Answer:
Yes, she has an ethical responsibility since she is the assistant controller of the
company. This implies that her position gives her enough authority to oversee
the operations of the company.
2. Of the three possible courses of action, which are appropriate and which are
inappropriate?
Answer:
Her first option is quite appropriate to take since she is under the authority of
the controller of the company, it is just right to discuss the matter to the
controller of the company. Her second option is inappropriate to take according
to the Code of Ethics for Professional Accountants stated in Fundamentals of
Accountancy by Omar Erasmo G. Ompongan (Chapter 2, pg. 24-25). If she will
pursue this option, she will violate confidentiality and that would lead to chaos
between the public and their company. The third option also is inappropriate
since it violates confidentiality which states that outside member of the board of
directors are not allowed to know internal operations of the company.
CASE 3: ETHICAL ISSUES
As the cost accountant for Dynamics Inc., what steps would you take in each of the
following situation?
a. Your brother-in-law, who is a financial analyst, asks you to do him a favor and
get him an advance copy of your companys financial statements. If he had
access to this information, he could double his year-end bonus and has said
that he would share half of the bonus with you.
Answer:
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If we were in this position, we will not let our companys financial statements in
the hands of our brother-in-law since this would violate confidentiality. We would
also violate objectivity if we let him use the financial statements for personal
advantage.
b. You decided to record the purchase of new equipment as an expense rather
than depreciate the equipment because you dont want to take the time to
learn the new depreciation rules.
Answer:
This action is inappropriate since as accountants, we still need to be competent
in all areas of accounting. We need to be well-versed about the various methods
of accounting. Professional competence and due care is the standard to be
considered in this situation.
c. The sales manager, whose year-end bonus is determined by the companys
annual sales volume, asks you to record several sales invoices in December
even though the products will not be finished and shipped until January.
Answer:
This situation will violate integrity and objectivity. Integrity since we are not
honest in keeping the records for the month of December only. The situation will
also violate objectivity in which the sales manager used the alteration of records
and increase of sales to his personal advantage.
d. Dynamo, Inc. is planning to purchase new desktop computers for the entire
company. Days before the deal is to be finalized, a friend of yours who works
for the computer company tells you that his company is coming out with an
improved desktop in two months. If you relay this information to purchasing
department of Dynamo, Inc. your friend may lose his job.
Answer:
The information of improved desktops might be quite appealing, but if we
disclose this information to Dynamo, Inc., we will violate the standard regarding
confidentiality and objectivity. Confidentiality since we are an outside party in
which we shouldnt have known the information. Objectivity since we might use
the new information as personal advantage to buy the new set of desktop
computers.

MEMBERS:
Aniel, Sheryl
Fernandez, April Kate
Gelvero, Nessan
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Uy, Lovelle

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