Ethics: Gannon Company requires its marketing managers to submit estimated cost-volume-profit data on all requests for new products, or expansions of a product line.
Linda Oslo is a new manager. Her calculations show a fixed cost for a new project at $100,000 and a variable cost of $5. Since the selling price is only $15 for the proposed product, 10,000 would need to be sold to break even. That is approximately twice the volume estimate for the first year. She shares her dismay with Tina Smythe, another manager.
Tina strongly advises her to revise her estimates. She points out that several of the costs that had been classified as fixed costs could be considered variable, since they are step costs and mixed costs. When the data has been revised classifying those costs as variable costs, the project appears viable.
Required:
1.Who are the stakeholders in this decision?
2.Is it ethical for Linda to revise the costs as indicated? Briefly explain.
3.What should Linda do?

Question

Ethics: Gannon Company requires its marketing managers to submit estimated cost-volume-profit data on all requests for new products, or expansions of a product line.
Linda Oslo is a new manager. Her calculations show a fixed cost for a new project at $100,000 and a variable cost of $5. Since the selling price is only $15 for the proposed product, 10,000 would need to be sold to break even. That is approximately twice the volume estimate for the first year. She shares her dismay with Tina Smythe, another manager.
Tina strongly advises her to revise her estimates. She points out that several of the costs that had been classified as fixed costs could be considered variable, since they are step costs and mixed costs. When the data has been revised classifying those costs as variable costs, the project appears viable.
Required: 
1.Who are the stakeholders in this decision?
2.Is it ethical for Linda to revise the costs as indicated? Briefly explain.
3.What should Linda do?

Quizplus · Accepted Answer

The Answer of Ethics: Gannon Company requires its marketing managers to submit estimated cost-volume-profit data on all requests for new products, or expansions of a product line.
Linda Oslo is a new manager. Her calculations show a fixed cost for a new project at $100,000 and a variable cost of $5. Since the selling price is only $15 for the proposed product, 10,000 would need to be sold to break even. That is approximately twice the volume estimate for the first year. She shares her dismay with Tina Smythe, another manager.
Tina strongly advises her to revise her estimates. She points out that several of the costs that had been classified as fixed costs could be considered variable, since they are step costs and mixed costs. When the data has been revised classifying those costs as variable costs, the project appears viable.
Required: 
1.Who are the stakeholders in this decision?
2.Is it ethical for Linda to revise the costs as indicated? Briefly explain.
3.What should Linda do?

Ethics: Gannon Company Requires Its Marketing Managers to Submit Estimated