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Paula Woodward is the head of the Information Systems Department at Moreno Manufacturing Company. Roland Randolph, the company's controller, is meeting with her to discuss changes in data gathering that relate to the company's new flexible manufacturing system. Woodward opens the conversation by saying,"Roland, the old job order costing methods just will not work with the new flexible manufacturing system. The new system is based on continuous product flow, not batch processing. We need to change to a process costing system for both data gathering and product costing. Otherwise, our product costs will be way off, and it will affect our pricing decisions. I found out abou the need for this change at a professional seminar I attended last month. You should have been there with me."

Randolph responds, "Paula, who is the accounting expert here? I know what product costing approach is best for this situation. Job order costing has provided accurate information for this product line for more than 15 years. Why should we change just because we've purchased a new machine? We've purchased several machines for this line over the years. And as for your seminar, I don't need to learn about costing methods. I was exposed to them all when I studied management accounting back in the late 1970s."

Is Randolph's behavior ethical? If not, what has he done wrong? What can Woodward do if Randolph continues to refuse to update the product costing system?

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  • Category:- Accounting Basics
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