Reference no: EM131693548

Question: Ethical Issues, Absorption Costing, Performance Measurement Mac Ericson and Tammy Ferguson met at an IMA conference two months ago and began dating. Mac is the controller for Longley Enterprises, and Tammy is a marketing manager for Sharp Products. Longley is a major supplier for Piura Products, a competitor of Sharp's. Longley has entered into a long-term agreement to supply certain materials to Piura. Piura has been developing a JIT purchasing and manufacturing system. As part of its development, Piura and Longley have established EDI capabilities. The following conversation took place during a lunch date: Tammy: ‘‘Mac, I understand that you have EDI connections with Piura. Is that right?''

Mac: ‘‘Sure. It's part of the partners-in-profits arrangement that we have worked so hard to get. It's working real well. Knowing Piura's production schedule helps us stabilize our own schedule. It has actually cut some of our overhead costs. It has also decreased Piura's costs. I estimate that we both have decreased production costs by about 7 to 10 percent.'' Tammy: ‘‘That's interesting. You know, I have a real chance of getting promoted to VP of marketing'' Mac: ‘‘Hey, that's great. When will you know?'' Tammy: ‘‘It all depends on this deal that I am trying to cut with Balboa-if I win the contract, then I think I have it. My main problem is with Piura. If I knew what its production schedule was, I could get a pretty good idea as to how long it would take it to deliver. I could then make sure that we beat its delivery offer-even if we had to work overtime and do all kinds of expediting. I know that our delivery speed is very, very important to Balboa.

Our quality is as good as Piura's, but it tends to beat us on delivery time. My boss would love to kick Piura. It has beat us too many times recently. I am wondering if you would be willing to help me out.'' Mac: ‘‘Tammy, you know that I would help if I could, but Piura's production schedule is confidential information. If word got out that I had leaked that kind of stuff to you, I would be history.'' Tammy: ‘‘Well, no one would ever know. Besides, I have already had a chat with Tom Anderson, our CEO. Our VP of finance is retiring. He knows about you and your capabilities. I think he would be willing to hire you-especially if he knew that you helped swing this Balboa deal. You could increase your salary by 40 percent.'' Mac: ‘‘I don't know. I have my doubts about the propriety of all this. It might look kind of funny if I take over as VP of finance not long after Piura loses the Balboa deal. But a VP position and a big salary increase are tempting. It's unlikely that I'll ever have a shot at the VP position in my company.'' Tammy: ‘‘Think it over. If you are interested, I'll arrange a dinner with Tom Anderson. He said he'd like to meet you. He knows a little about this. I'm sure that he has the ability to keep it quiet. I don't think there is much risk.''

Required: 1. Based on this information, has Mac violated any of the IMA standards of ethical conduct? Explain.

2. Suppose that Mac decides to provide information in exchange for the VP position. What IMA standards would he violate?