Mrs. Yoder is a large family-style restaurant chain located throughout the Midwest in Amish communities. Currently, Mrs.

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Mrs. Yoder is a large family-style restaurant chain located throughout the Midwest in Amish communities. Currently, Mrs. Yoder makes its own biscuits. Customers love these biscuits; they are light, fluffy, and incredibly delicious.
People are not eating out at restaurants as much as they did before the recession hit in 2007. Like many other restaurants, Mrs. Yoder is under increasing pressure to control its costs to help to counteract the lower number of diners. As part of its efforts to remain cost competitive, Mrs. Yoder is analyzing whether it should continue to make its own biscuits or to outsource part of the biscuit-making process by purchasing ready-made dough from a national supplier.
Sean Murray works as a management accountant at the Mrs. Yoder restaurant group. Sean is asked by the controller to analyze whether the biscuits should continue to be made in-house from scratch or if the company should purchase ready-made dough from a national supplier.
Sean's mother-in-law, Blair Barker, is a salesperson for a national food manufacturer. Sean decides to get a bid from her before contacting any other suppliers. Blair has been struggling financially since the illness and subsequent death of Sean's father-in-law last year and could use the sales commissions generated by this order. Sean emails Blair and asks her for a bid price for the ready-made dough. Blair sends him a price of $33.20 per case (a case of dough makes 12 dozen biscuits).
Sean analyzes the cost of making the biscuits in-house. He arrives at the following schedule of cost for the dough to make 12 dozen biscuits:
A Cost per 12 dozen 1 Cost item 2 Flour 3 Baking soda 4 Baking powder 5 Salt 6 Unsalted butter 7 Buttermilk 8 Bakery lab

Sean's analysis shows that the restaurant should purchase the ready-made dough from the national supplier because the ready-made dough is less expensive than making the dough in-house. However, Sean has deliberately included all of the fixed costs in the cost calculation of making the biscuits in-house. Part of those fixed costs is unavoidable, but he does not distinguish between avoidable and unavoidable fixed costs in his analysis. The unavoidable portion of the fixed cost allocated to 12 dozen biscuits is $1.24. Sean submits his analysis to the controller. In his report, Sean recommends that Mrs. Yoder choose Blair's firm to supply the dough for its biscuits. Sean chooses to say nothing about his relationship to Blair, figuring no one will know since his mother-in-law has a different last name than he does.
The controller accepts Sean's analysis, and Mrs. Yoder enters into a contract with Blair's firm for the ready-made dough.
Requirements
1. Using the IMA Statement of Ethical Professional Practice as an ethical framework (refer to Exhibit 1-7), answer the following questions:
a. What is(are) the ethical issue(s) in this situation?
b. What are Sean's responsibilities as a management accountant?
2. When making the decision to outsource the dough, what other factors should be considered?

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Related Book For  answer-question

Managerial Accounting

ISBN: 978-0134128528

5th edition

Authors: Karen W. Braun, Wendy M. Tietz

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