Question

Ethics and standard costs (adapted from CMA exam). Western Farms is a producer of items made from local farm products that are distributed to supermarkets. Over the years, price competition has become increasingly important, so Doug Gilbert, the company's controller, is planning to implement a standard cost system for Western Farms. He asked his cost accountant, Joe Adams, to gather cost information on the production of strawberry jam (Western Farms' most popular product). Joe reported that strawberries cost $0.80 per quart, the price he intends to pay to his good friend who has been operating a strawberry farm in the red for the past couple of years. Due to an oversupply in the market, the prices for strawberries have dropped to $0.50 per quart. Joe is sure that the $0.80 price will be enough to pull his friend s strawberry farm out of the red and into the black.

Is Joe Adams's behavior regarding the cost information he provided to Doug Gilbert unethical? Explain your answer.

Answer 1