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    Ethical Issues in Managerial Accounting for Budgeting, Absorption costing and ABC

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    Discuss the general ethical dilemmas in Managerial Accounting and the guidelines set forth to resolve unethical issues.

    Keys to remember:

    -Discussion of general ethical issues in Managerial Accounting NOT FINANCIAL ACCOUNTING
    -At least three sources cited in APA format

    Areas to consider
    -Absorption Costing
    -Activity Based Costing

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    Solution Preview

    General Ethical Dilemmas in Managerial Accounting

    One of the 10 commandments of accounting is that general ethical dilemmas are everywhere in managerial accounting. One needs to understand and appreciate the behavioral and ethical issues faced by management accountants. There are different kinds of ethical constraints. This could be:
    ? conflicts between individual and organization values
    ? conflicts between the organizations's stated and practiced values.

    Some of the examples of ethical dilemma are:

    Overhead Allocation: Increasing or decreasing the predetermined overhead rate can manipulate the inventory level and profitability of the firm. Since the value of inventory under the absorption costing (generally used for profit and loss account) reflects the direct manufacturing cost and allocation of manufacturing overheads, the company's product cost changes with overhead allocation. Which in turn may help to understate or overstate the value of closing inventory and profits.
    Moving administrative overheads to manufacturing overheads: In some case the line between whether a cost can be classified as administrative overhead or manufacturing overhead is very fine. By ...

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