This preview shows page 1. Sign up to view the full content.
Unformatted text preview: route she takes.
Alternatively, Ruth might decide that the use of absorption costing for internal reporting and bonus calculation has led to this situation. She could lobby
higher management to begin using variable costing as a way of avoiding
these dysfunctional decisions. Ruth will have a very hard time proving unethical behavior—at worst, Paul may be accused of having poor judgment regarding future economic upturns.
3. The following standards may apply:
Integrity. Refrain from engaging in any conduct that would prejudice carrying
out duties ethically. (III-2)
Credibility. Communicate information fairly and objectively. (IV-1) Disclose
fully all relevant information that could reasonably be expected to influence
an intended user’s understanding of the reports, comments, and recommendations. (IV-2) 10–34
1. ROI based on initial estimates = $1,870,000/$15,600,000 = 11.99%
ROI based on Mel’s estimates = $2,340,000/$15,600,000 = 15% 2. Jason is definitely facing an ethical dilemma. While it is true that the sales
and expense projections are estimates, they are the best ones available to
him. If he uses a sales revenue projection from the top end of the range, he
will be deliberately basing the ROI estimate on a highly unlikely sales figure.
Sales and expense projections are not fantasy figures, they are supposed to
be management’s best estimate of what will actually happen. If Jason prepares the report in accordance with Mel’s desires, he will be knowingly fabricating data.
One might wonder whether or not Mel’s offer to “back up” Jason is sufficient
to let Jason off the hook. It is not. If Mel wants the false projections badly
enough, let him sign them. Jason may have thought he had his dream job, but
it is about to turn into a nightmare. Companies don’t take kindly to employees
who lie, and this lie is sure to come out. If the project is approved, and the
sales do not approach $2.34 million, you can bet that the vice president of 345 sales will be quick to point out that she predicted only $1.87 million. Mel will
surely pin the blame directly on Jason, the one whose name is on the report.
3. Jason should prepare the report using the figures he thinks are most descriptive of the project’s potential. He should feel free to include information about
the predicted range of sales, and to point out any other information that reflects favorably on the project. If Mel continues to pressure Jason, then Jason
might consider looking for another job. RESEARCH ASSIGNMENTS
Answers will vary. 10–36
Answers will vary. 346...
View Full Document