Reference no: EM132632405

Company A sells networking equipment to large corporations and federal, state, and local governments. Corporate sales are the result of a competitive bidding process, where Company A competes against other companies based on selling price. Sales to the government, however, are determined on a cost plus basis, where the selling price is determined by adding a fixed markup percentage to the total job cost.

James Lopez is the cost accountant for the Electronics Division of Company A. The division is under pressure from senior management to improve income from operations. As James reviewed the division's job cost sheets, he realized that he could increase the division's income from operations by moving a portion of the direct labor hours that had been assigned to the job order cost sheets of corporate customers onto the job order costs sheets of government customers. He believed that this would create a "win-win" for the division by (1) reducing the cost of corporate jobs, and (2) increasing the cost of government jobs whose profit is based on a percentage of job cost. James submitted this idea to his division manager, who was impressed by his creative solution for improving the division's profitability.

Answer the question below.

Problem 1: Is Jame's plan ethical?