ACC301 Cost Accounting: Ethical Issues
Unit 7 Discussion: Costing of Customers: Ethical Issues
Central State College (CSC) is a state-supported college with a large business school. The business school offers undergraduate degrees and training programs for local manufacturers. The state does not support the training programs, which are paid for by the manufacturer under a fixed-price contract.
The college president has asked the dean of the business school for a breakdown of the costs of the program. The president will be meeting with state legislators asking for an increase in support for the college’s programs. The dean has assigned you to lead the team that will develop the costs of the program.
The business school’s computer lab is a major cost item. The lab is used during the day for the undergraduate program and in the evening for the training program.
- How will you recommend that the cost of the computer lab be allocated to the two programs? Be explicit in your description of the allocation base.
- The dean tells you that the training program should not be allocated any costs other than its direct costs. She points out that the college was established for undergraduate education and the training program is an incremental activity. “After all, if we didn’t have the training program, we would still have the computer lab,” she says. Do you agree with the dean? Is the dean’s suggestion ethical?