Outdoor Living's management is starting a continuous inprovement policy that requires a 10% reduction in standard costs each year for the next three years. Brian Cook, manufacturing foreman of the Teak furniture line, asks Lane to set loose standard costs this year before the continuous improvement policy is implemented. Cook argues that there is no other way to meet the tightening standards while maintaining the high quality of the Teak line.

Requirements:

1. Use the IMA's ethical guidelines(www.imanet.org/PDFs/Statement%20of%20Ethics_web.pdf) to identify the ethical delimma.

2. Identify the relevant factors, and suggest what Lane should recommend to the controller.