Jerry worked for a company that produced high$-$tech navigation devices that were

sold to both military and civilian clients. Jobs for each client were maintained

individually and costs for each client were accumulated using job order costing.

The military contracts were priced "cost$-$plus," meaning that price was calculated

based on actual accumulated production costs plus a profit markup. The civilian

contracts were bid out in competition with other vendors who also submitted bids

to the same client. It was a very competitive market, and every dollar counted.

All the jobs, military and civilian, were completed in the same factory

Jerry was responsible for accumulating actual costs for each job. He had derived

an overhead allocation method that shifted overhead costs away from the civilian

jobs and increased the overhead assigned to the military "cost$-$plus" jobs. He

never thought anyone would question his methodology, but one of his

accountants had noticed and brought it to the attention of the government

auditor when they were on site.

Jerry never imagined he'd be sitting in Washington being grilled mercilessly by a

panel of congressmen. Now, as the congressman from Michigan rakes him over

the coals, Jerry is wondering about his chances of doing jail time.

Requirements

Based on what you have read above, what was Jerry's motivation to

allocate overhead to civilian and military jobs in the manner he chose?

$($Hint: why would increasing overhead costs on the government contracts

benefit the company and motivate Jerry to do what he did?$).$

Do you agree with Jerry's chosen approach for allocating overhead

between civilian and government contracts? Why$/$why not?

Why could the government consider Jerry's actions fraudulent?