Question

Kenwood Homes, Inc., allows employees to purchase, at cost, manufacturing materials, such as metal and lumber, for personal use. To purchase materials for personal use, an employee must complete a materials requisition form, which must then be approved by the employee's immediate supervisor. Cheryl Long, an assistant cost accountant, charges the employee an amount based on Kenwood's net purchase cost. Cheryl Long is in the process of replacing a deck on her home and has requisitioned lumber for personal use, which has been approved in accordance with company policy. In computing the cost of the lumber, Long reviewed all the purchase invoices for the past year. She then used the lowest price to compute the amount due the company for the lumber. Discuss whether Long behaved in an appropriate manner.

Answer 1

Institute of Management Accountants(IMA) has sated four ethical priciples for its members. They are;

1.Honesty

2.Fairness

3.Objectivity

4. Responsibility.

In the given scenario,Long, a Cost Accountant has used the lowest price to compute the amount due to the company for the lumber. Such an act is against the Objectivity principle as his decision to use the lowest cost was influenced by the personal gain he may receive on doing so.

Long being a Cost Accountant has failed to adhere to the Ethical Principles lay down by his professional body- Institute of Management accountants(IMA).