Consider the following conversation between Leonard Bryner, president and manager of a firm engaged in job manufacturing, and Chuck Davis, certified management accountant, the firm’s controller.
Leonard: Chuck, as you know, our firm has been losing market share over the past three years. We have been losing more and more bids, and I don’t understand why. At first, I thought that other firms were undercutting simply to gain business, but after examining some of the public financial reports, I believe that they are making a reasonable rate of return. I am beginning to believe that our costs and costing methods are at fault.
Required:
1. Do you agree or disagree with Chuck Davis and the advice that he gave Leonard Bryner? Explain.
2. Was there anything wrong or unethical in the behavior that Chuck Davis displayed? Explain your reasoning.
3. Do you think that Chuck was well informed—that he was aware of the accounting implications of ABC and that he knew what was meant by cost drivers? Should he have been well informed?