Reference no: EM13490681

The Discussion Board (DB) is part of the core of online learning. Classroom discussion in an online environment requires the active participation of students and the instructor to create robust interaction and dialogue. Every student is expected to create an original response to the open-ended DB question as well as engage in dialogue by responding to posts created by others throughout the week. At the end of each unit, DB participation will be assessed based on both level of engagement and the quality of the contribution to the discussion.

At a minimum, each student will be expected to post an original and thoughtful response to the DB question and contribute to the weekly dialogue by responding to at least two other posts from students. The first contribution must be posted before midnight (Central Time) on Wednesday of each week. Two additional responses are required after Wednesday of each week. Students are highly encouraged to engage on the Discussion Board early and often, as that is the primary way the university tracks class attendance and participation.
The purpose of the Discussion Board is to allow students to learn through sharing ideas and experiences as they relate to course content and the DB question. Because it is not possible to engage in two-way dialogue after a conversation has ended, no posts to the DB will be accepted after the end of each unit.

You are an experienced supervisor at the ABC Company. Recently some of the corporation's top executives have been sentenced to prison for unethical behavior, which ended up causing both the company itself to lose money as well as a loss in the stock price and therefore shareholder value. As a result, the firm has embarked upon a company-wide training program in ethical/legal behavior. The trainer has assigned you and other supervisors a brief written assignment.

The trainer indicated that for manufacturing firms using an "absorption-based accounting system," managers and CEOs have the ability to "manipulate" reported profitability in order to enhance their year-end bonuses. They could do this by simply overproducing units that may not be sold right away. This causes some fixed costs to end up in the firms ending inventory, rather than in that period's cost of goods sold (COGS) on the income statement. This makes COGS lower than it otherwise would be, and therefore makes profits higher. While this is legal, it distorts the firm's actual profitability and most people consider it to be unethical.

Discuss the following:

Describe the ethical issue at hand in your own words.

Describe why a management accountant would play a role in this "overproducing" issue.

Discuss your personal opinion on whether you think this is an important issue, and explain why.

Describe the differences and similarities between managerial accounting and financial accounting.

If you were the Board of Directors, overseeing this firm's CEO, what would you do to prevent this "overproduction" from taking place simply to enhance his or her bonus?