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Question - Hazel Manufacturing produces component parts for laser optic equipment. Customers include civilian companies and the National Government. Under the most government contract, Hazel receives reimbursement for its manufacturing costs plus a specified profit. For most civilian contracts, Hazel bids a fixed price and either earns a profit or incurs a loss, depending on how well the company control costs, Hazel accountants allocate to government contracts any overhead whose proper allocation to a particular product is questionable.
1. Is Hazel's overhead allocation practice ethical? Give your reason.
2. Who benefits and who is harmed by the Hazel practice?
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