Title: Competency Assessment: (CU1 M2) Ethics Assessment Answer Key
Course: SkillsCom BA 213 15.0 > Section: Credit Unit 1 Module 2

Ethics in Action

Case #1

R#1        Farley’s pricing policy states that the bid price should be based on:

Design cost + manufacturing cost + distribution cost + customer service cost + profit margin.

Using only manufacturing cost rather than full costs understates the cost of the job and results in a lower bid price. By excluding the several hundred thousand dollars of design costs, the company may submit a bid price that is too low. If the contract is executed at the current price, Farley’s profit margin will be lower than expected, and the company may even incur a loss.

R#2         Assuming that this error will have a significant negative impact on company profits, York will have to discuss the situation with the company president, and he will have to make a recommendation.

Possible alternatives are:

a.       Farley, Inc. will live up to the contract, and absorb the losses in order to maintain good relations with its customer.

b.      Farley, Inc. will approach the customer and discuss renegotiating the contract.

c.       Farley, Inc. will attempt to use legal tactics to annul the contract.