Dave Miller is the controller of Mica Corporation. Mica produces five industrial cleaning products. Miller recently decided to implement activity-based costing at Mica. In designing the system, he decided to identify heating costs as a separate cost pool. These costs will be allocated to products using the square feet of production space as a cost driver. Thus, the more square footage a particular product line requires, the greater its allocation of heating costs will be. Miller has asked each production manager to submit an estimate of the production space occupied by their respective product lines. The figures he receives will be used to allocate the heating cost pool. The five production managers at Mica are paid an annual bonus based on their ability to control production costs traceable to their respective product lines.

a. What ethical concern do you have regarding the method used to gather information about space utilization at Mica?
b. What suggestions do you have regarding how this information should be gathered?

  • CreatedApril 17, 2014
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