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Marcus Lim Case Study

In: Business and Management

Submitted By NANDITHANATARAJ
Words 319
Pages 2
Marcus Lim, the cost accountant for Hi-Power Mower Company, recently installed activity-based costing at Hi-Power’s St. Louis lawn tractor (riding mower) plant where three models—the 8-horsepower Blade Runner, the 12-horsepower Quick Cut, and the 18-horsepower Super Cut—are manufactured. Marcus’s new product costs for these three models show that the company’s traditional costing system had been significantly under costing the 18-horsepower Super Cut. This was due primarily to the lower sales volume of the Super Cut compared to the Blade Runner and the Quick Cut.
Before completing his analysis and reporting this result to management, Marcus is approached by his friend Ray Pon, who is the production manager for the 18-horsepower Super Cut model. Ray has heard from one of Marcus’s staff about the new product costs and is upset and worried for his job because the new costs show the Super cut to be losing, rather than making money.
At first Ray condemns the new cost system, whereupon Marcus explains the practice of activity-based costing and why it is more accurate than the company’s present system. Even more worried now, Ray begs Marcus, “Massage the figures just enough to save the line from being discontinued. You don’t want me to lose my job do you? Anyway, nobody will know.”
Marcus holds firm but agrees to recompute all his calculations for accuracy before submitting his costs to management.
Questions
(a) Who are the stakeholders in this situation?
(b) What, if any, are the ethical considerations in this situation?
(c) What are Marcus’s ethical obligations to the company? To his friend?

Source of case: Weygandt, Kimmel, Kieso: Management Accounting, 5th Ed., Wiley.
Your response to the above case study will be enhanced if you refer to the Institute of Management Accountants (IMA) Statement of Ethical Professional Practice (see http://www.imanet.org/pdfs/statement%20of%20Ethics_web.Pdf). Again, cite your

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