Answered: Is there anything I did wrong in the…

Is there anything I did wrong in the eyes of either party? If you were in the project manager’s situation, how would you have handled this negotiation differently? Explain.

Business Its Legal Ethical & Global Environment

10th Edition

ISBN:9781305224414

Author:JENNINGS

Publisher:JENNINGS

Chapter21: Management: Employment Discrimination

Section: Chapter Questions

Problem 7QAP

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Recently, the sales and marketing manager for Pasifika Company, Mr. Reece Rooney couldn’t understand the result of two bids that the firm has submitted. According to the company’s policy, a 50 percent mark-up is added to the full manufacturing cost when calculating the bid. One particular job (Job A01) had been rejected by a prospective customer since the proposed bid was $4 per unit higher than the winning bid. However, a customer has accepted a second job (Job B01) and was pleased with the favorable bid. This customer revealed that Pasifika’s price was $44 per unit lower than the next-lowest bid. Reece knew that the implementation of the cost leadership strategy has resulted in Pasifika’s competitive advantage, therefore he assumed that the issue must be related to cost allocation procedures. When Reece further investigated the matter, he found that Pasifika used a pre-determined plantwide overhead rate based on direct labor hours. The budgeted data used to calculate this rate…
Recently, the sales and marketing manager for Pasifika Company, Mr. Reece Rooney couldn’t understand the result of two bids that the firm has submitted. According to the company’s policy, a 50 percent mark-up is added to the full manufacturing cost when calculating the bid. One particular job (Job A01) had been rejected by a prospective customer since the proposed bid was $4 per unit higher than the winning bid. However, a customer has accepted a second job (Job B01) and was pleased with the favorable bid. This customer revealed that Pasifika’s price was $44 per unit lower than the next-lowest bid. Reece knew that the implementation of the cost leadership strategy has resulted in Pasifika’s competitive advantage, therefore he assumed that the issue must be related to cost allocation procedures. When Reece further investigated the matter, he found that Pasifika used a pre-determined plantwide overhead rate based on direct labor hours. The budgeted data used to calculate this rate…
Recently, the sales and marketing manager for Pasifika Company, Mr. Reece Rooney couldn’t understand the result of two bids that the firm has submitted. According to the company’s policy, a 50 percent mark-upis added to the full manufacturing cost when calculating the bid. One particular job (Job A01) had been rejected by a prospective customer since the proposed bid was $4 per unit higher than the winning bid.However, a customer has accepted a second job (Job B01) and was pleased with the favorable bid. This customer revealed that Pasifika’s price was $44 per unit lower than the next-lowest bid. Reece knew that the implementation of the cost leadership strategy has resulted in Pasifika’s competitive advantage, therefore he assumed that the issue must be related to cost allocation procedures. When Reece further investigated the matter, he found that Pasifika used a pre-determined plantwide overhead rate based on direct labor hours. The budgeted data used to calculate this rate follows:…
Recently, the sales and marketing manager for Pasifika Company, Mr. Reece Rooney couldn’t understandthe result of two bids that the firm has submitted. According to the company’s policy, a 50 percent mark-upis added to the full manufacturing cost when calculating the bid. One particular job (Job A01) had beenrejected by a prospective customer since the proposed bid was $4 per unit higher than the winning bid.However, a customer has accepted a second job (Job B01) and was pleased with the favorable bid. Thiscustomer revealed that Pasifika’s price was $44 per unit lower than the next-lowest bid.Reece knew that the implementation of the cost leadership strategy has resulted in Pasifika’s competitiveadvantage, therefore he assumed that the issue must be related to cost allocation procedures. When Reecefurther investigated the matter, he found that Pasifika used a pre-determined plantwide overhead rate basedon direct labor hours. The budgeted data used to calculate this rate…
Tonya Martin, CMA and controller or the Parts Division of Gunderson Inc., was meeting with Doug Adams, manager of the division. The topic of discussion was the assignment of overhead costs to jobs and their impact on the divisions pricing decisions. Their conversation was as follows: Tonya: Doug, as you know, about 25% of our business is based on government contracts, with the other 75% based on jobs from private sources won through bidding. During the last several years, our private business has declined. We have been losing more bids than usual. After some careful investigation, I have concluded that we are overpricing some jobs because of improper assignment of overhead costs. Some jobs are also being underpriced. Unfortunately, the jobs being overpriced are coming from our higher-volume, labor-intensive products, so we are losing business. Dong: I think I understand. Jobs associated with our high-volume products are being assigned more overhead than they should be receiving. Then when we add our standard 40% markup, we end up with a higher price than our competitors, who assign costs more accurately. Tonya: Exactly. We have two producing departments, one labor-intensive and the other machine-intensive. The labor-intensive department generates much less overhead than the machine-intensive department. Furthermore, virtually all of our high-volume jobs are labor-intensive. We have been using a plantwide rate based on direct labor hours to assign overhead to all jobs. As a result, the high-volume, labor-intensive jobs receive a greater share of the machine-intensive departments overhead than they deserve. This problem can be greatly alleviated by switching to departmental overhead rates. For example, an average high-volume job would be assigned 100,000 of overhead using a plantwide rate and only 70,000 using departmental rates. The change would lower our bidding price on high-volume jobs by an average of 42,000 per job. By increasing the accuracy of our product costing, we can make better pricing decisions and win back much of our private-sector business. Doug: Sounds good. When can you implement the change in overhead rates? Tonya: It wont take long. I can have the new system working within four to six weekscertainly by the start of the new fiscal year. Doug: Hold it. I just thought of a possible complication. As I recall, most of our government contract work is done in the labor-intensive department. This new overhead assignment scheme will push down the cost on the government jobs, and we will lose revenues. They pay us full cost plus our standard markup. This business is not threatened by our current costing procedures, but we cant switch our rates for only the private business. Government auditors would question the lack of consistency in our costing procedures. Tonya: You do have a point. I thought of this issue also. According to my estimates, we will gain more revenues from the private sector than we will lose from our government contracts. Besides, the costs of our government jobs are distorted. In effect, we are overcharging the government. Doug: They dont know that and never would unless we switch our overhead assignment procedures. I think I have the solution. Officially, lets keep our plantwide overhead rate. All of the official records will reflect this overhead costing approach for both our private and government business. Unofficially. I want you to develop a separate set of books that can be used to generate the information we need to prepare competitive bids for our private-sector business. Required: 1. Do you believe that the solution proposed by Doug is ethical? Explain. 2. Suppose that Tonya decides that Dougs solution is not right and objects strongly. Further suppose that, despite Tonyas objections, Doug insists strongly on implementing the action. What should Tonya do?
Cherise Ortega, marketing manager for Romer Company, was puzzled by the outcome of two recent bids. The company’s policy was to bid 150 percent of the full manufacturing cost. One job(labeled Job 97-28) had been turned down by a prospective customer, who had indicated that the proposed price was $3 per unit higher than the winning bid. A second job (Job 97-35) had been accepted by a customer, who was amazed that Romer could offer such favorable terms. This customer revealed that Romer’s price was $43 per unit lower than the next lowest bid.Cherise has been informed that the company was more than competitive in terms of cost control. Accordingly, she began to suspect that the problem was related to cost assignment pro-cedures. Upon investigating, Cherise was told that the company uses a plantwide overhead rate based on direct labor hours. The rate is computed at the beginning of the year using budgeteddata. Selected budgeted data are given below.…
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