Reviewing the standard costs

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Nita Maliqi is the accountant for Outdoor Living, a manufacturer of outdoor furniture that is sold through specialty stores and Internet companies. Maliqi is responsible for reviewing the standard costs. While reviewing the standards for the coming year, two ethical issues arise.

Ethical Issue 1

Maliqi has been approached by Harkan Lamiri, a former colleague who worked with Maliqi when they were both employed by a public accounting firm. Lamiri has recently started his own firm, Lamiri Benchmarking Associates, which collects and sells data on industry benchmarks. He offers to provide Maliqi with benchmarks for the outdoor furniture industry free of charge if she will provide him with the last three years of Outdoor Living's standard and actual costs. Lamiri explains that this is how he obtains most of his firm's benchmarking data. Maliqi always has a difficult time with the standard-setting process and believes that the benchmark data would be very useful.

Ethical Issue 2:

Outdoor Living's management is starting a continuous improvement policy that requires a 10% reduction in standard costs each year for the next three years. Dan Jacobs, manufacturing foreman of the Teak furniture line, asks Maliqi to set loose standard costs this year before the continuous improvement policy is implemented. Jacobs argues that there is no other way to meet the tightening standards while maintaining the high quality of the Teak line.


1. Use the IMA's ethical guidelines ( Ethics_web.pdf) to identify the ethical dilemma in each situation. I also uploaded them in 'Homework'.

2. Identify the relevant factors in each situation and suggest what Maliqi should recommend to the controller.

Please open your own separate Word file without repeating the question and upload in Dropbox!

Reference no: EM131033684


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