An Ethical Question Involving Standard Costs Essay Sample
Taylor Industries. Inc. . develops standard costs for all its direct stuffs. direct labour. and overhead costs. It uses these costs to monetary value merchandises. cost stock lists. and measure the public presentation of buying and production directors. It updates the criterion costs whenever costs. monetary values. or rates change by 3 per centum or more.
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It besides reviews and updates all standard costs each December ; this pattern provides current criterions that are appropriate for usage in valuing year-end stock lists on the company’s fiscal statements.
Jody Elgar is in charge of standard costing at Taylor Industries. On November 30. she received a memo from the main fiscal officer informing her that Taylor Industries was sing buying another company and that she and her staff were to prorogue seting standard costs until late February ; they were alternatively to concentrate on analysing the proposed purchase.
In the 3rd hebdomad of November. monetary values on more than 20 of Taylor Industries’ direct stuffs had been reduced by 10 per centum or more. and a new labour brotherhood contract had reduced several classs of labour rates. A alteration of standard costs in December would hold resulted in lower ratings of stock lists. higher cost of goods sold because of stock list write-offs. and lower net income for the twelvemonth. Elgar believed that the company was confronting an operating loss and that the assignment to measure the proposed purchase was designed chiefly to maintain her staff from revising and take downing standard costs. She questioned the main fiscal officer about the assignment and reiterated the demand for updating the criterion costs. but she was once more told to disregard the update and dressed ore on the proposed purchase. Elgar and her staff were relieved of the rating assignment in early February. The purchase ne’er materialized.
Assess Jody Elgar’s actions in this state of affairs. Did she follow all ethical waies to work outing the job? What are the effects of neglecting to set the criterion costs?