Managerial Accounting and Professional Ethics – MBA 571
THE ROLE OF ETHICS IN MANUFATURING OVERHEAD,
JOB COSTING AND ACTIVITY BASED COSTING
March 16, 2015
In today’s business environment, the role of accountants and ethics is significant. Managers and other decision makers base their company’s economic decisions mainly on information that accountants provide. Since accuracy of decisions depends on the reliability of accounting information, the ethical dimension of the profession has gained considerable attention recently. In fact, management accountants are required to make ethical choices in many settings. Professional organizations support management accountants in recognizing and solving specific situations or dilemmas which management accountants may encounter by preparing codes of ethics and teaching them. However, ethics education alone solely does not lead to a success in the development of ethical behavior. An individual’s willingness and motivation has been recognized as a crucial factor in engaging in ethical decision making. Therefore, this paper is intended to recognize some of the important and influential factors on ethical motivation of management accountants and how they relate to various costs and costing methods used by businesses.
What role does ethics in managerial accounting play as far as important concepts such as manufacturing overhead, job order costing, and activity based costing? First, we need to determine what these concepts are and how they relate to business and financial decisions made by various businesses. Our text indicates that ‘most manufacturing companies separate manufacturing costs into three broad categories: direct materials, direct labor, and manufacturing overhead’ (Garrison). Direct materials that go into the final product are called raw materials whose costs can be easily traced to the finished...