Ace Fertilizer Company: Ethical Cost Allocations and Price Determination

Abstract

The case illustrates how profit maximization goals have the potential to influence ethical decision making. Abby, the assistant director of manufacturing, has the opportunity to enhance both company profitability and reduce the purchase costs of a product for the brother of George Smilee, the director of manufacturing. However, that decision would shift costs to another customer, Breeland Ltd. Being a CMA, Abby is appropriately using the IMA Statement of Ethical Professional Practice as a guide to the proper course of action. The case requires students to assume Abby’s position. In so doing, students are challenged to investigate the appropriate course of action. Students are asked to use the IMA Statement of Ethical Professional Practice when answering the questions posed and in deciding upon an appropriate course of action for Abby.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Table 1: IMA Statement of Ethical Professional Practice

Members of IMA shall behave ethically. A commitment to ethical professional practice includes overarching principles that express our values, and standards that guide our conduct.

Principles

IMA’s overarching ethical principles include: Honesty, Fairness, Objectivity, and Responsibility. Members shall act in accordance with these principles and shall encourage others within their organizations to adhere to them.

Standards

A member’s failure to comply with the following standards may result in disciplinary action.

I. Competence

Each member has a responsibility to:

  • Maintain an appropriate level of professional expertise by continually developing knowledge and skills.
  • Perform professional duties in accordance with relevant laws, regulations, and technical standards.
  • Prepare decision support information and recommendations that are accurate, clear, concise, and timely.
  • Recognize and communicate professional limitations or other constraints that would preclude responsible judgment or successful performance of an activity.

II. Confidentiality

Each member has a responsibility to:

  • Keep information confidential except when disclosure is authorized or legally required.
  • Inform all relevant parties regarding appropriate use of confidential information. Monitor subordinates’ activities to ensure compliance.
  • Refrain from using confidential information for unethical or illegal advantage.

III. Integrity

Each member has a responsibility to:

  • Mitigate actual conflicts of interest, regularly communicate with business associates to avoid apparent conflicts of interest. Advise all parties of any potential conflicts.
  • Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
  • Abstain from engaging in or supporting any activity that might discredit the profession.

IV. Credibility

Each member has a responsibility to:

  • Communicate information fairly and objectively.
  • Disclose all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses, or recommendations.
  • Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law.

Resolution of Ethical Conflict

In applying the Standards of Ethical Professional Practice, you may encounter problems identifying unethical behavior in resolving an ethical conflict. When faced with ethical issues, you should follow your organization’s established policies on the resolution of such conflict. If these policies do not resolve the ethical conflict, you should consider the following courses of action:

  • Discuss the issue with your immediate supervisor except when it appears that the supervisor is involved. In that case, present the issue to the next level. If you cannot achieve a satisfactory resolution, submit the issue to the next management level. If your immediate superior is the chief executive officer or equivalent, the acceptable reviewing authority may be a group such as the audit committee, executive committee, board of directors, board of trustees, or owners. Contact with levels above the immediate superior should be initiated only with your superior’s knowledge, assuming he or she is not involved. Communication of such problems to authorities or individuals not employed or engaged by the organization is not considered appropriate, unless you believe there is a clear violation of the law.
  • Clarify relevant ethical issues by initiating a confidential discussion with the IMA Ethics Counselor or other impartial advisor to obtain a better understanding of possible courses of action.
  • Consult your own attorney as to legal obligations and rights concerning the ethical conflict.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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