Curtis Rich, cost accountant for high power mower company currently installed activity based costing at High power St Louis Lawn tractor where three models : 8 hp blade runner, 12 hp quick cut, and 18 hp super cut are manufactured. Curtis's new product costs for these three models show that companies traditional costing system had been significantly under-costing the 18 hp super cut. This was due primarily to lower sales volume of the super cut compared to blade runner and quick cut.
Before completing his analysis and reporting results to management, Curtis is approached by his friend Ed Gray, who is production manager for 18 hp super cut
model. Ed has heard from one of Marcus's staff about new product cost and is upset and worried for his job because new cost show super cut to be losing rather than making money.
At first, Ed condemns new cost system where upon Curtis describes the practice of
activity based costing and why it is more precise than the companies present system. Even more worried now, Ed begs Curtis, "Massage figures just enough to save line from being discontinued. You do not want me to loose my job, do you? Anyway, nobody will know".
Curtis holds firm but agrees to re-compute all his calculations for accuracy before submitting his cost to management.
a) Find who are stakeholders in this situation?
b) What, if any, are ethical considerations in this situation? ( Curtis's ethical consideration ? Ed's ethical consideration ? Management's ethical consideration ?
c) Explain what are Curtis's ethical obligations to the corporation? and to his friend ?