Mara Rivera, cost accountant at Emprersas Cortacsped, recently adopted the activity-based costing method at the lawnmower plant

María Rivera, cost accountant at Emprersas Cortacésped, recently adopted the activity-based costing method at the lawnmower plant where three models are manufactured: The 8-horsepower Roadrunner, the 12-horsepower Antelope, and the 18-horsepower Cheetah. horsepower.

According to ABC, the new manufacturing costs for these three models demonstrate that the company's traditional cost system had significantly underestimated the cost of the 18-horsepower Cheetah model. This was mainly due to the lower sales volume for this model.

Before completing her analysis and reporting these results to management, Maria is approached by her friend Pedro hers, who is the Production Manager for the 18 horsepower Cheetah model. Pedro has heard from one of Maria's employees about the new costs for the three lawnmower models and is upset and concerned about his job because the new costs show that the Cheetah model is losing, rather than making money. At first, Pedro blames the new ABC cost system. However, Maria explains the practice of activity-based costing and why it is more accurate than the company's current system of a single overhead allocation rate. Even more concerned now, Pedro pleads with Maria, "He plays around with the math a bit, just enough to save the line from being discontinued." You don't want me to lose my job, do you? Anyway, no one will know.

Prepare a short essay (no more than two pages), where

a) Who are the parties affected or interested in this situation?

(b) What are the ethical considerations in this situation?

(c) What are Maria's ethical obligations to the company?

(d) What are Maria's ethical obligations to her friend?

Answer rating: 100% (QA)

Ethics in Accounting Ethical standards are crucial for accountants to advance their professional aptitude and enhance business efficiencies NambukaraGamage 2020 In reality the accounting profession de... View the full answer