>> Accounting Basics
At Hartford Manufacturing Company, production workers in the Assembly Department are paid on the basis of productivity. The labor time standard for a unit of production is established through periodic time studies conducted by Time Management Consulting. In a time study, the actual time required to complete a specific task by a worker is observed. Allowances are then made for preparation time, rest periods, and clean-up time. Ron Price is one of several veterans in the Assembly Department.
Ron is informed by Time Management that he will be used in the time study for the assembly of a new product. The findings will be the basis for establishing the labor time standard for the next 6 months. During the test, Ron deliberately slows his normal work pace in an effort to obtain a labor time standard that will be easy to meet. Because it is a new product, the Time Management representative who conducted the test is unaware that Ron did not give the test his best effort.
- Who are the stakeholders in this situation? Who is benefited and who is harmed?
- Was Ron ethical in the way he performed the time study test?
- What measures might the company take to obtain valid data for setting the labor time standard?