John Smith, A Junior Accountant At Dynamics Engineering

John Smith, a junior accountant at Dynamics Engineering was

Question 1john Smith A Junior Accountant At Dynamics Engineering Was

Question 1john Smith A Junior Accountant At Dynamics Engineering Was

Question 1 John Smith, a junior accountant at Dynamics Engineering was working on cost allocations to completed jobs for the month. The cost sheet for GOVT360 showed 100 hours of direct labor. John's supervisor altered the job cost sheet to allow for 150 hours which increased both the direct labor and overhead cost for the job. When John asked about this, his supervisor stated that because this was a government job, it was billed at "cost +" so the more costs allocated to the job, the more profit Dynamics Engineering would make. She also stated that the excess hours would cover follow-up work on the job.

Paper For Above instruction

Analysis of Dynamics Engineering’s Costing Procedures and Ethical Responsibilities of John Smith

The case of John Smith at Dynamics Engineering highlights significant issues related to costing procedures and ethical conduct in accounting practices. Traditionally, manufacturing and service companies allocate overhead costs based on direct labor hours, machine hours, or other cost drivers. This method ensures that costs are assigned proportionally to the resources consumed by each job or product (Horngren et al., 2013). When overhead costs increase as direct labor hours increase, it reflects a direct cost linkage intended to match the expenses incurred with the activities performed. However, in the specific context of government contracts, billing at "cost plus" can complicate this relationship, as additional overhead may not necessarily lead to increased profit but could be used to cover legitimate follow-up work or related costs (Dyckman & Hoffer, 2006).

In this scenario, the supervisor’s decision to alter the job cost sheet to reflect 150 hours instead of the actual 100 hours raises questions about the integrity of the company's cost allocation procedures. Elevating direct labor hours artificially inflates both direct costs and overhead allocations, potentially leading to inflated billings and profits. This practice could be viewed as unethical, especially if it results in overcharging the government or misrepresenting costs (ICMA, 2014). It's crucial to examine the underlying principles that guide ethical conduct in accounting, as articulated by the Institute of Management Accountants (IMA). The IMA's Statement of Ethical Professional Practice emphasizes principles like integrity, credibility, confidentiality, and credibility (IMA, 2020).

Regarding John Smith’s responsibilities, he must adhere to the standards of ethical conduct. The first standard, integrity, requires honesty and fairness in all professional activities. The second standard, credibility, involves communicating information fairly and objectively, which includes reporting facts accurately rather than manipulating data. John must also observe confidentiality and uphold professional competence. When encountering ethical conflicts, the IMA recommends a systematic resolution process, involving assessing the situation, discussing concerns with the supervisor, escalating the issue if necessary, and seeking advice or reporting to higher management (IMA, 2020).

In this case, John’s responsibilities are twofold. He should first ensure that his work reflects accurate cost data, maintaining integrity and objectivity. Second, he has an obligation to escalate his concerns regarding the altered cost sheet to a higher authority within the organization, such as the supervisor's manager or the company’s ethics committee. If the unethical practice persists or if he faces retaliation, he should consider external options, including professional bodies or regulatory agencies, to report the issue in accordance with the IMA’s guidelines on ethical resolution.

Handling the situation delicately and professionally involves documenting observations and conversations, requesting clarification from supervisors, and escalating concerns through proper channels. A suggested protocol includes scheduling a meeting with the supervisor’s superior, presenting factual concerns about the integrity of the cost data, and seeking guidance on ethical procedures. Throughout this process, John must act with professionalism, maintain confidentiality, and avoid gossip or unwarranted accusations (Daft, 2012).

In conclusion, accurately allocating costs and adhering to ethical standards are paramount for maintaining trust and integrity within financial reporting. John Smith’s ethical obligations require honesty, fairness, and transparency, along with proactive steps to resolve potential misconduct. Organizations benefit from fostering a culture that emphasizes ethical conduct, comprehensive training, and clear reporting mechanisms to support accounting professionals in upholding these standards.

References

• Daft, R. L. (2012). Management. Cengage Learning.
• Dyckman, T., & Hoffer, R. (2006). Government Contract Cost Principles and Procedures. Government Printing Office.
• Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2013). Introduction to Management Accounting. Pearson.
• Institute of Management Accountants (IMA). (2014). Statement of Ethical Professional Practice. IMA.
• Institute of Management Accountants (IMA). (2020). Guidelines on Ethical Standards for Management Accountants. IMA.
• Dyckman, T., & Hoffer, R. (2006). Government Contract Cost Principles and Procedures. Government Printing Office.
• International Accounting Standards Board (IASB). (2001). International Financial Reporting Standards (IFRS). IASB.
• Horngren, C. T., et al. (2013). Cost accounting: A managerial emphasis. Prentice Hall.
• Investopedia. (2017). https://www.investopedia.com/terms/s/strategic-management.asp
• International Accounting Standards Committee (IASC). (2001). Development of international accounting standards.