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Assume you work for a company that produces golf carts sold throughout the world. The company’s management is in the process of establishing the standard hours of direct labor required to complete one golf cart. Assume you are the production supervisor and you receive a bonus for each quarter that shows a favorable labor efficiency variance. That is, you receive a bonus for each quarter showing actual direct labor hours that are fewer than budgeted direct labor hours. Management has asked for your input in establishing the standard number of direct labor hours required to complete one golf cart.
1. As the production supervisor, describe the ethical conflict you face when asked to help with establishing direct labor hour standards.
2. How might the company avoid this conflict and still achieve the goal of obtaining reliable direct labor hour information? That is, what type of incentives might be offered to ensure the production supervisor provides accurate information?
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