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Zink Company manufactures high-tech component which passes through two production processing departments, Molding and Assembly. Department managers are partially compensated on basis of units of products completed and transferred out relative to units of product put into production. This was intended as encouragement to be efficient and to minimize waste.

Sara Jones is a department head in Molding Department, and Frank Smith is her quality control inspector. During month of June, Sara had three new employees who were not yet technically skilled. Thus, many of the units produced in June had minor molding defects. In order to maintain department's normal high rate of completion, Sara told Frank to pass through inspection and on to Assembly Department all units that had defects non detectable to human eye. "Company and industry tolerances on this product are too high anyway," says Sara. "Less than 2% of the units we produce are subjected in the market to the stress tolerance we've designed into them. The odds of those 2% being any of this month's units are even less. Anyway, we're saving company money."

Required: 

1. Who are the stakeholders involved?

2. What alternatives does Frank have in this situation?

3. What may the company do to prevent this situation from occurring?

Your responses must be 3-4 sentences long each and represent "active communication."

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M92746

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