Ethics; Equivalent units of production Cincinnati Beverages Inc. has three plants that...

Ethics; Equivalent units of production

Cincinnati Beverages Inc. has three plants that make and bottle cola, lemon-lime, and miscellaneous flavored beverages, respectively. The raw materials, labor costs, and automated technology are comparable among the three plants. Top management has initiated an incentive compensation plan whereby the workers and managers of the plant with the lowest unit cost per bottle will receive a year-end bonus. The results, approved by the plant manager and reported by the plant controllers at each location, were as follows:

Required:

1. When provided copies of the results as a justification for distributing the bonus to the St. Bernard employees, the plant controllers at Norwood and Hartwell accused St. Bernard of manipulating the inventory figures. Reviewing the above schedule, what do you think is the nature of the accusation and how would such action affect the unit cost computation?

2. Is there anything in the Institute of Management Accountants (IMA) Code of Professional Ethics that the St. Bernard plant controller should be aware of in this situation?

3. Assume that the St. Bernard plant controller revises the unit cost to more accurately reflect reality. What should she do if the plant manager insists that the unit cost computation remain as is?