Xavier University – Ateneo de Cagayan

School of Business and Administration

MINI-CASE ABOUT ETHICS AND EQUIVALENT UNITS OF

PRODUCTION

Submitted by:

Lachica, Reymon

Maestrado, Hans Rue

Momongan, Bluenathanoj Emmanuelle

Moslem, Muhammad Harris Moslem

Muti, Mahmoud Raji

Sagocsoc, Reyna Mae

Sajulan, Sherry Vhic

Submitted to:

Ms. Estela Ganas

November 21, 2017

 It is equally important that the internal accounting reports prepared by management
accountants be as accurate and unbiased as possible. To that, Institute of Management
Accountants (IMA) has issued a Statement of Ethical Professional Practice that must be followed
by the members. This ethical principle includes: honesty, fairness, objectivity and responsibility.
When a member failed to comply with the following standards, then it may result in disciplinary
action. On the other hand, equivalent production represents the number of whole units that could
have been completed during a period, given the amount of work that is performed.

Facts of the case

1. Syracuse Beverages Inc. has three plants – DeWitt, Fayetteville and Manlius

2. The company makes and bottles cola, lemon-lime and other miscellaneous flavored beverages.

3. Raw materials, labor costs and automated technology are comparable among three plants.

4. Top level management provides an incentive compensation plan (year-end bonus) to workers
and managers of the plant with the lowest unit cost per bottle.

Item DeWitt Fayetteville Manlius

Materials $200,000 $450,000 $325,000
Labor 170,000 375,000 250,000
Overhead 340,000 750,000 500,000
Total $710,000 $1,575,000 $1,075,000
Equivalent units of
production:
Completed 3,500,000 6,200,000 6,450,000
Ending work in 100,000 400,000 -
process (50% complete) (25% complete)
Equivalent units 3,550,000 6,300,000 6,450,000
Unit cost $0.20 $0.25 $0.167

At the end of this case we should be able to answer these questions:

1. When provided copies of the results as a justification for distributing the bonus to the
Manlius employees, the plant controllers at DeWitt and Fayetteville accused Manlius of
manipulating the inventory figures. Reviewing the above schedule, what do you think is the
nature of the accusation and how would such action affect the unit cost computation?
 The nature of the accusation happens to be that no ending work in process left as all units
becomes finished goods. Manlius plant was accused by the plant controllers at DeWitt and
Fayetteville for manipulating the inventory figures for treating all ending work in process as
finished goods, because they report no ending work in process. As a result, if we presumed that
this manipulation of inventory figures is real then the unit cost for this matter is actually lesser
since there is no ending work in process units. This might tell us that If there is any ending work
in process that should be converted to a lesser number of equivalent units, this would cause the
number of units in the denominator of the unit cost formula to be smaller than reported, thus
resulting in a higher than reported unit cost figure.

2. Is there anything in the Institute of Management Accountants (IMA) Code of

Professional Ethics that the Manlius plant controller should be aware of in this
situation?

Competence

i. Provide decision support information and recommendations that are accurate, clear,
concise, and timely.

ii. Recognize and communicate professional limitations or other constraints that

would preclude responsible judgment or successful performance of an activity.

Integrity

i. Abstain from engaging in or supporting any activity that might discredit the
profession.

Credibility

i. Communicate information fairly and objectively

ii. Disclose delays or deficiencies in information, timeliness, processing, or internal

controls in conformance with organization policy and/or applicable law.

3. Assume that the Manlius plant controller revises the unit cost to more accurate reflect
reality. What should she do if the plant manager insists that the unit cost computation
remain as is?
 Discuss the problem with the immediate superior. If the superior is involved, it should be
presented initially to the next higher level of management.

If you reasonably believe your employer is doing something illegal or unethical, you
should first bring it to your supervisor’s attention, Frisch says. If it’s your supervisor
you suspect, exhaust the chain of command within the company. “Hopefully the
company will investigate the matter. If no one within the chain of command responds,
then there is generally a government agency with whom one can file a complaint. If
the government agency investigates, it usually will not reveal how it decided to target
the company or who may have tipped them off.”

 Consult an advisor to obtain a better understanding of possible courses of action and to

clarify the relevant ethical issue.

 Get your own attorney and consult as to legal obligations and rights concerning the
ethical conflict.

 If the ethical conflict still exists after exhausting all levels of internal review, there may
be no other recourse on significant matters but to resign from the organization.

 File a Report
When you're filing a report about unethical behavior in the workplace, your ethics
have to be above reproach. Consult human resources about what your company's
policy is concerning the reporting of unethical behavior. Make sure that you correctly
fill out all paperwork and return it, along with your evidence, in a timely manner. Be
impartial when completing your report and make sure that it only contains facts, not
your feelings on the situation. Do not blow the situation out of proportion, though you
may mention any relevant consequences to the employer as a result of the unethical
behavior.