Problem 16-56 Essay

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16 – 56 Ethics and Standard Costs Farmer Frank’s produces items from local farm products and distributes them to supermarkets. Over the years, price competition has become increasingly important, so Susan Kramer, the company’s controller, is planning to implement a standard cost system for Farmer Frank’s. She asked her cost accountant, Margaret Chang, to gather cost information on the production of blueberry preserves (Farmer Frank’s most popular product). Margaret reported that blueberries cost $.75 per quart, the price she intends to pay to her good friend who has been operating a blueberry farm that has been unprofitable for the last few years. Because of an oversupply in the market, the price for blueberries has dropped to $.60 per quart. Margaret is sure that the $.75 price will be enough to pull her friend’s farm out of the red and into the black. Required Is Margaret’s behavior regarding the cost information she provided to Susan unethical? Explain your answer. Based on the information provided here, it sounds as if Margaret has withheld pertinent information from the company’s controller. If this is the case, then yes, Margaret’s decision to help her friend is unethical. Though she is still able to purchase the blueberries within the company’s budget, there is a better option for blueberry purchases. Essentially, Margaret’s decision would be the same as stealing $.15 per quart of blueberries from the company. That’s $.15 per quart of profit that the company will be losing due to Margaret’s decision. However, had Margaret shared all of the information with the company’s controller, and they had agreed that it would mutually beneficial to continue paying her friend $.75 per quart, though the market price is $.60 per quart, then it would a the controller’s decision and it would be a completely informed decision. As a freight broker, I have had

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