Question

Tennessee Welding and Supply’s controller, Tina Bynum, developed new product costs for the company’s standard, deluxe, and heavy-duty model welders using activity-based costing. It was apparent that the firm’s traditional product costing system had been assigning too little cost to the deluxe model welder by a significant amount, largely because of its lower sales volume. Before she could report back to the president, Bynum received a phone call from her friend, Sheryl Breeden, the production manager for the deluxe model welder. Breeden was upset and let Bynum know it. “Tina, I’ve seen your new cost analysis report. There’s no way the deluxe model cost anywhere near what your numbers say? For years and years, this line has been highly profitable, and its reported product cost was low. Now you’re telling us it costs more than twice what we thought. I just don’t buy it.” Bynum briefly explained to her friend about activity-based costing and why it resulted in more accurate product costs. “Sheryl, the deluxe model is really losing money. It simply has too low a volume to be manufactured efficiently.” Breeden was even more upset now. “Tina, if you report these new product costs to the president, he’s very likely going to discontinue the deluxe model. My job’s on the line, Tina! How about taking another look at those numbers.
Do you get what I’m saying? Who’s going to know?” “I’ll know, Sheryl. And you’ll know,” responded Bynum. “Look, I’ll go over my analysis again to make sure I haven’t made an error.”

Required
A. Is the controller, Tina Bynum, acting ethically by making data known that may potentially lead to job losses?
B. Is the production manager, Sheryl Breeden, acting ethically?
C. What are Bynum’s ethical obligations? To the president? To her friend?



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  • CreatedMarch 11, 2015
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