Financial & Managerial Accounting 17th Edition by Jan Williams ,Susan Haka,Mark Bettner,Joseph Carcello

تمرين 40

Kendahl Plastics Corporation conducts with ;to manufacture component parts used in com­munications satellites. NASA reimburses Kendahl on the basis of the actual manufacturing costs it incurs, plus a fixed percentage. Prior to being awarded a contract. Kendahl must submit a hid that details the estimated costs associated with each project. An examination of Keridahl's job cost sheets reveals that actual costs consistently exceed cost estimates quoted during the bidding pro­cess. As a consequence NASA ends up paying considerably more than the bids Kendahl submits.
A Kendahl representative was recently quoted as saying, "We really aren't overcharging NASA for the work that we do. The actual costs show n on our job cost sheets seem high only because we are forced to understate our bid estimates in order to be awarded contracts. It's a common practice, and everybody does it. The truth of the matter is companies that quote realistic bid prices are not awarded contracts."
Instructions
Let us assume that it is common practice to purposely underestimate bids in order to win contracts. Is it wrong for Kendahl to take part in this activity as long as it does not overstate the actual costs it incurs?