z Corporation produces a molded plastic casing, LX20A, for desktop computers. Summary data from its 2013 income statement are as follows: Revenues $ 6,000,000 Variable costs (3,600,000) Fixed costs (2,000,000) Operating income $
Aranguez Corporation produces a molded plastic casing, LX20A, for desktop computers. Summary data from its 2013 income statement are as follows:
|
Revenues |
$ 6,000,000 |
|
Variable costs |
(3,600,000) |
|
Fixed costs |
(2,000,000) |
|
Operating income |
$ 400,000 |
Jane Dall, Aranguez’s president, is very concerned about Aranguez Corporation’s poor profitability. She asks Giselle James, production manager, and Lester Saline, controller, to see if there are ways to reduce costs.
After two weeks, James returns with a proposal to reduce variable costs to 50% of revenues by reducing the costs Aranguez currently incurs for safe disposal of waste plastic. Saline is concerned that this would expose the company to
Given Giselle James’s comments, what should Lester Saline do? Be sure to refer to the IMA’s Ethical Guidance
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