Topic: Managerial Accounting prompt (found in additional materials)

Ethics Case of Managerial Accounting

Edward Saylor is the president of Ramon Company, a company whose stock is traded on a national exchange. In a meeting with investment analysts at the beginning of the year, Saylor had predicted that the company’s earnings would grow by 20% by this year. Unfortunately, sales have been less than expected for the year, and Saylor concluded within two weeks of the end of the fiscal year that it would be impossible to ultimately report an increase in earnings as large as predicted unless some drastic action was taken. Accordingly, Saylor has ordered that wherever possible, expenditure should be postponed to the new year ----including canceling or postponing orders with suppliers, delaying planned maintenance and training, and cutting back on end-of- year advertising and travel. Additionally, Saylor ordered the company’s controller to carefully scrutinize all costs that are currently classified as period costs and reclassify as many as possible as product costs. The company is expected to have substantial inventories at the end of the year.

The following aspects should be covered in your report:

1. Why would reclassifying period costs as product costs increase this period’s reported earnings?

2. Do you believe Saylor’s actions, such as postponing and canceling expenditures, are ethical? Why or why not? Please cite the ethical standards (such as competence, integrity, credibility and confidentiality) to support your opinion.

3. Do you believe Saylor’s action, such as reclassifying period costs as product costs, are ethical? Why or why not? Please cite the ethical standards (such as competence, integrity, credibility and confidentiality) to support your opinion.

4. If you were the company’s controller, what would you do?

Instructions

1. The case report should be typed with double-space. No more than 5 pages. 2. Do not just answer the questions presented in this page. The report should be completed in

the paper formant with introduction, major contents, and conclusion. 3. You can cite the ethical standards or moral theories to support your ideas, such as the ethical

code in the IMA Statement of Ethics. 4. Your report will be evaluated based on the rubrics of written communications skills, critical

thinking, and business ethics. The related business ethics rubrics are attached.

Attachment - Business Ethics Rubrics

Objective Trait Deficient (1)

Competent (2)

Exemplary (3)

Score

Graduates can recognize the ethical issues implicit in a business situation

• Identification of issues &

• Statement of root cause of issues

Student evaluates the case simply by reiterating the language of the questions he/she is asked

Student exhibits an understanding and grasp of the ethical and moral concepts when stating an issue

Student exhibits and understanding and grasp of ethical and moral concepts and identifies issues effectively

Graduates can describe and use

ethical frameworks, principals, laws, etc. applicable to business

situations

• Accuracy and use of appropriate frameworks, principals, laws, legal considerations, etc.

Student cites and uses little or no theory to identify the moral/ethical issues

Student cites and more or less accurately uses some moral theories to identify one or two issues

Student accurately cites and uses several moral theories to identify issues

Graduates can develop viable ethical

alternatives for resolving or at least

addressing, a problem in business

• Identify different ethical alternatives &

• Evaluate

ethical alternatives

Student makes little or no creative suggestions for addressing the issues posed by the case or the service learning experience

Student generates some creative suggestions for addressing the issues posed by the case or the service learning experience

Student generates many relevant creative suggestions for addressing the issues posed by the case or the service learning experience