Question

Cassidy Manning is assistant controller at LeMar Packaging, Inc., a manufacturer of cardboard boxes and other packaging materials. Manning has just returned from a packaging industry conference on activity-based costing. She realizes that ABC may help LeMar meet its goal of reducing costs by 5% over each of the next three years.

LeMar Packaging’s Order Department is a likely candidate for ABC. While orders are entered into a computer that updates the accounting records, clerks manually check customers’ credit history and hand-deliver orders to shipping. This process occurs whether the sales order is for a dozen specialty boxes worth \(80 or 10,000 basic boxes worth \)8,000.

Manning believes that identifying the cost of processing a sales order would justify (1) further computerization of the order process and (2) changing the way the company processes small orders. However, the significant cost savings would arise from elimination of two positions in the Order Department. The company’s sales order clerks have been with the company many years. Manning is uncomfortable with the prospect of proposing a change that will likely result in terminating these employees.

Use the IMA’s ethical standards (see Chapter 16) to consider Manning’s responsibility when cost savings come at the expense of employees’ jobs.

Short answer

The members should be professional, must learn new skills and gain knowledge, should not use any sensitive information for illegal purposes, and should not get involved in an activity that affects the image of the profession.

Step-by-step solution

Definition of Ethics

Ethics are defined as the rules that the business organization ought to follow. In a business, organizational ethics are a set of principles that are expected to be followed by every person involved in the business.

Responsibilities when cost savings come at the expense of employees’ job

• Professional expertise should be maintained by all the members of the organization.
• They should never stop learning new skills and gaining knowledge
• Any type of confidential information should not be used by the member for any illegal purposes.
• The members should not get involved in any activity which might discredit their profession.