Carmen Richter, the cost accountant for Hiland Power Machines, recently installed activity-based costing at Hiland's Miami...

 

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Carmen Richter, the cost accountant for Hiland Power Machines, recently installed activity-based costing at Hiland's Miami riding mower plant where three models-- -the 8-horsepower Lightening Bolt, the, the 12-horsepower Speed Demon, and the 18-horsepower, Zinger--are manufactured. Carmen's new product costs for these three models show that the company's traditional costing system had been significantly undercosting the 18-horsepower Zinger. This was due primarily to the lower sales volume of the Zinger compared to the Lightening Bolt and the Speed Demon. Before completing her analysis and reporting these results to management, Carmen is approached by her friend Elias Glean, who is the production manager for the 18-horsepower Zinger model. Elias has heard from one of Carmen's staff about the new product costs and is upset and worried for his job because the new costs show the Zinger to be losing, rather than making money. At first, Elias condemns the new cost system, where upon Carmen explains the practice of activity-based costing and why it is more accurate than the company's present system. Even more worried now, Elias begs Carmen, "Massage the figures just enough to save the line from being discontinued. You don't want me to lose my job, do you? Anyway, nobody will know." Carmen holds firm but agrees to recompute all of her calculations for accuracy before submitting her costs to management. Instructions: 1. Who are the stakeholders in this situation? 2. What, if any, are the ethical considerations in this situation? Carmen Richter, the cost accountant for Hiland Power Machines, recently installed activity-based costing at Hiland's Miami riding mower plant where three models-- -the 8-horsepower Lightening Bolt, the, the 12-horsepower Speed Demon, and the 18-horsepower, Zinger--are manufactured. Carmen's new product costs for these three models show that the company's traditional costing system had been significantly undercosting the 18-horsepower Zinger. This was due primarily to the lower sales volume of the Zinger compared to the Lightening Bolt and the Speed Demon. Before completing her analysis and reporting these results to management, Carmen is approached by her friend Elias Glean, who is the production manager for the 18-horsepower Zinger model. Elias has heard from one of Carmen's staff about the new product costs and is upset and worried for his job because the new costs show the Zinger to be losing, rather than making money. At first, Elias condemns the new cost system, where upon Carmen explains the practice of activity-based costing and why it is more accurate than the company's present system. Even more worried now, Elias begs Carmen, "Massage the figures just enough to save the line from being discontinued. You don't want me to lose my job, do you? Anyway, nobody will know." Carmen holds firm but agrees to recompute all of her calculations for accuracy before submitting her costs to management. Instructions: 1. Who are the stakeholders in this situation? 2. What, if any, are the ethical considerations in this situation?

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1 The stakeholders in this situation are the employees the customers associated with the product the ... View the full answer