Ace Fertilizer Case Study

Derek Rotz
MBA-502-61/03
3/2/18

In the case of Ace Fertilizer Company, Assistant Director of Manufacturing , Abby Conroy is faced with an ethical issue that was presented to her by boss George Smilee who is the Director of Manufacturing. Ace Fertilizer’s business is to produce lawn & gardening fertilizer, and the company is known for delivering the highest quality special order products. The fact that they can deliver on time with top quality is what helps to drive their business. They use a consistent mark up on special orders at an 80% mark up over the cost of the orders. Abby prefers to allocate indirect cost using activity-based costing for these orders, but recognizes that not all costs are driven by volume of output. Abby prepares a

In agreement with company policy, Abby bills the full cost of the ordered materials, assuming there will be unused product. However, once there is an order for the unused product, the disposal charges is no longer a cost to Ace and therefore does not need to be passed to the customer. The cost of the product itself can now be allocated accordingly between the two cost estimates. George’s assessment includes double billing for a single material cost, as well as the disposal fee, which is not needed in order to inflate the bottom line. This now brings forth the ethical issue as double billing for a single cost and not removing unnecessary cost from the estimate in order to inflate profits. Its also a conflicting issue when one customer is family of the Director of Manufacturing. Abby’s decision to revise the order is the ethical decision to be made in the case. In this situation Abby should go up the chain of command to Tom Brennen the COO since he is the one to sign off on all orders, he should be made aware that there is pending orders for the remaining product that Breeland is not using. Ace Fertilizer’s bottom line is reduced with a modified estimate it reflects a professional and ethical price determination, this makes Aces products more valuable to all customers. The following is the adjusted

Also implement checks and balances to make sure there is no conflicts of interest and favors being handed out in any business decision. With a second person checking over orders the ethical decision could be avoided because there would be no way to charge for the disposal of the 10 gallons Breeland will not use and then charge Josh’s company for the 10 gallons. This would also help Abby to make sure she is charging the correct amounts, had she sent the proposal over to Breeland before the weekend it would have been wrong and could have caused problems. With a second person looking things over these kind of mistakes could be avoided. Another recommendation for Abby would be to share the information to Tom. The information that George is covering-up may affect the decision on whether or not Tom approves the order. It would be unethical for Abby to also withhold this information from Tom. Furthermore Ace Fertilizer should put the employees through ethical training in order to avoid these types of ethical issues in the future. Also, personal relationships with coworkers outside of work should be avoided. This would help stop the pressure