Ethics in Action TAC Industries Inc. sells heavy equipment to large corporations and federal, state, and local governments. Corporate sales are the result of a competitive bidding process, where TAC competes against other companies based on selling price. Sales to the government, however, are determined on a cost plus basis, where the selling price is determined by adding a fixed markup percentage to the total job cost. Tandy Lane is the cost accountant for the Equipment Division of TAC Industries Inc. The division is under pressure from senior management to improve operating income. As Tandy reviewed the division’s job cost sheets, she realized that she could increase the division’s operating income by moving a portion of the direct labor hours that had been assigned to the job cost sheets of corporate customers onto the job order costs sheets of government customers. She believed that this would create a “win–win” for the division by (1) reducing the cost of corporate jobs, and (2) increasing the cost of government jobs whose profit is based on a percentage of job cost. Tandy submitted this idea to her division manager, who was impressed by her creative solution for improving the division’s profitability. Is Tandy’s plan ethical?

BuyFind

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
BuyFind

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

Solutions

Chapter
Section
Chapter 16, Problem 1TIF
Textbook Problem

Ethics in Action

TAC Industries Inc. sells heavy equipment to large corporations and federal, state, and local governments. Corporate sales are the result of a competitive bidding process, where TAC competes against other companies based on selling price. Sales to the government, however, are determined on a cost plus basis, where the selling price is determined by adding a fixed markup percentage to the total job cost.

Tandy Lane is the cost accountant for the Equipment Division of TAC Industries Inc. The division is under pressure from senior management to improve operating income. As Tandy reviewed the division’s job cost sheets, she realized that she could increase the division’s operating income by moving a portion of the direct labor hours that had been assigned to the job cost sheets of corporate customers onto the job order costs sheets of government customers. She believed that this would create a “win–win” for the division by (1) reducing the cost of corporate jobs, and (2) increasing the cost of government jobs whose profit is based on a percentage of job cost. Tandy submitted this idea to her division manager, who was impressed by her creative solution for improving the division’s profitability.

Is Tandy’s plan ethical?

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Chapter 16 Solutions

Financial And Managerial Accounting
Ch. 16 - Issuance of materials On May 7, Bergan Company...Ch. 16 - Direct labor costs During May, Bergan Company...Ch. 16 - Factory overhead costs During May, Bergan Company...Ch. 16 - Applying factory overhead Bergan Company estimates...Ch. 16 - Job costs At the end of May, Bergan Company had...Ch. 16 - Cost of goods sold Pine Creek Company completed...Ch. 16 - Transactions in a job order cost system Five...Ch. 16 - The following information is available for the...Ch. 16 - Cost of materials issuances under the FIFO method...Ch. 16 - Materials issued are as follows: Journalize the...Ch. 16 - Kingsford Furnishings Company manufactures...Ch. 16 - A summary of the time tickets is as follows:...Ch. 16 - Entry for factory labor costs The weekly time...Ch. 16 - Schumacher Industries Inc. manufactures...Ch. 16 - Eclipse Solar Company operates two factories. The...Ch. 16 - Exotic Engine Shop uses a job order cost system to...Ch. 16 - Predetermined factory overhead rate Obj. 2...Ch. 16 - The following account appears in the ledger prior...Ch. 16 - Collegiate Publishing Inc. began printing...Ch. 16 - The following events took place for Rushmore...Ch. 16 - Job order cost accounting for a service company...Ch. 16 - Job order cost accounting for a service company...Ch. 16 - Barnes Company uses a job order cost system. The...Ch. 16 - Entries and schedules for unfinished jobs and...Ch. 16 - Job cost sheet Remnant Carpet Company sells and...Ch. 16 - Analyzing manufacturing cost accounts Fire Rock...Ch. 16 - Flow of costs and income statement Ginocera Inc....Ch. 16 - Entries for costs in a job order cost system Royal...Ch. 16 - Entries and schedules for unfinished jobs and...Ch. 16 - Job cost sheet Stretch and Trim Carpet Company...Ch. 16 - Analyzing manufacturing cost accounts Clapton...Ch. 16 - Flow of costs and income statement Technology...Ch. 16 - Antolini Enterprises produces mens sports coats...Ch. 16 - Alvarez Manufacturing Inc. is a job shop. The...Ch. 16 - Raneri Trophies Inc. uses a job order cost system...Ch. 16 - Brady Furniture Company manufactures wooden oak...Ch. 16 - Ethics in Action TAC Industries Inc. sells heavy...Ch. 16 - Team Activity As an assistant cost accountant for...Ch. 16 - Communication Carol Creedence, the plant manager...Ch. 16 - RIRA Company makes attachments such as backhoes...Ch. 16 - Todd Lay just began working as a cost accountant...Ch. 16 - Baldwin Printing Company uses a job order cost...Ch. 16 - John Sheng, a cost accountant at Starlet Company,...Ch. 16 - Lucy Sportswear manufactures a specialty line of...Ch. 16 - Patterson Corporation expects to incur 70,000 of...

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