Small-case Analysis

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Click to edit Master subtitle style 5/4/11 Small-case Analysis Anna Bevis Charles Ian Lawrence Linda
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5/4/11 Question Connor Bly is a sales manager for an automobile dealership. He earns a bonus each year based on revenue from the number of autos sold in the year less related warranty expenses . Actual warranty expenses have varied over the prior 10 years from a low of 3% of an automobile’s
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5/4/11 Does the warranty accrual Yes Ethical dilemma: Bly’s yearly bonus depends on the amount warranty expense accrued at year end. Larger provision for warranty expense =>smaller bonus obtained by Bly
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5/4/11 Does the warranty accrual Conservatism prescribes the use of the less optimistic amount when more than one estimate of the amount to be received or paid exists and these estimates are about equally likely
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5/4/11 Does the warranty accrual Bargaining with the accountant =>Bly’s income may fluctuate from 3%-10% of the selling price of automobiles.
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