Ethics Case of Managerial Accounting (15 points)
Edward Saylor is the president of Ramon Company, a company whosestock is traded on a
national exchange. In a meeting with investment analysts at thebeginning of the year, Saylor had
predicted that the companyâs earnings would grow by 20% by thisyear. Unfortunately, sales
have been less than expected for the year, and Saylor concludedwithin two weeks of the end of
the fiscal year that it would be impossible to ultimately report anincrease in earnings as large as
predicted unless some drastic action was taken. Accordingly, Saylorhas ordered that wherever
possible, expenditure should be postponed to the new year----including canceling or postponing
orders with suppliers, delaying planned maintenance and training,and cutting back on end-of-
year advertising and travel. Additionally, Saylor ordered thecompanyâs controller to carefully
scrutinize all costs that are currently classified as period costsand reclassify as many as possible
as product costs. The company is expected to have substantialinventories at the end of the year.
Required:
1. Why would reclassifying period costs as product costs increasethis periodâs reported
earnings? Please review Chapter 2. (3 points)
2. Do you believe Saylorâs actions, such as postponing andcanceling expenditures, are ethical?
Why or why not? Please cite the ethical standards (such ascompetence, integrity, credibility
and confidentiality) to support your opinion. (3 points)
3. Do you believe Saylorâs action, such as reclassifying periodcosts as product costs, are
ethical? Why or why not? Please cite the ethical standards (such ascompetence, integrity,
credibility and confidentiality) to support your opinion. (4points)
4. If you were the companyâs controller, what would you do? (5points)
Prepare a brief case report for no more than 4pages
Ethics Case of Managerial Accounting (15 points)
Edward Saylor is the president of Ramon Company, a company whosestock is traded on a
national exchange. In a meeting with investment analysts at thebeginning of the year, Saylor had
predicted that the companyâs earnings would grow by 20% by thisyear. Unfortunately, sales
have been less than expected for the year, and Saylor concludedwithin two weeks of the end of
the fiscal year that it would be impossible to ultimately report anincrease in earnings as large as
predicted unless some drastic action was taken. Accordingly, Saylorhas ordered that wherever
possible, expenditure should be postponed to the new year----including canceling or postponing
orders with suppliers, delaying planned maintenance and training,and cutting back on end-of-
year advertising and travel. Additionally, Saylor ordered thecompanyâs controller to carefully
scrutinize all costs that are currently classified as period costsand reclassify as many as possible
as product costs. The company is expected to have substantialinventories at the end of the year.
Required:
1. Why would reclassifying period costs as product costs increasethis periodâs reported
earnings? Please review Chapter 2. (3 points)
2. Do you believe Saylorâs actions, such as postponing andcanceling expenditures, are ethical?
Why or why not? Please cite the ethical standards (such ascompetence, integrity, credibility
and confidentiality) to support your opinion. (3 points)
3. Do you believe Saylorâs action, such as reclassifying periodcosts as product costs, are
ethical? Why or why not? Please cite the ethical standards (such ascompetence, integrity,
credibility and confidentiality) to support your opinion. (4points)
4. If you were the companyâs controller, what would you do? (5points)
Prepare a brief case report for no more than 4pages
