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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem

Manager: If I can reduce my costs by $40,000 during this last quarter, my division will show a profit that is 10% above the planned level, and I will receive a $10,000 bonus. However, given the projections for the fourth quarter, it does not look promising. I really need that $10,000. I know of one way that I can qualify. All I have to do is lay off my three most expensive salespeople. After all, most of the orders are in for the fourth quarter, and I can always hire new sales personnel at the beginning of the next year.

Required:

CONCEPTUAL CONNECTION What is the right choice for the manager to make? Why did the ethical dilemma arise? Is there any way to redesign the accounting reporting system to discourage the type of behavior that the manager is contemplating?

To determine

Explain the correct choice for the manager to make in the given situation. Identify the reasons for the given ethical dilemma and discuss whether accounting reporting system should be redesigned.

Explanation

Ethical Conduct:

Ethical conduct involves indulging into fair practices and making equitable decisions. Ethical conduct requires sacrifice of the self-interest for the betterment of the society.

Manager should not layoff its expensive sales person to meet the target and receive bonus. These sales person were responsible for bringing in orders, even when these orders have been received and new sales person could be hired, it would not be ethical to layoff these sales person.

Ethical dilemma arose since, manager wanted to earn bonus and bonus was linked with target profits. Therefore, manager wanted to receive that bonus amount by making unethical choices. Manager had to choose between self-interest and ethical conduct in the course of work, which influenced the manager to opt for unethical measures...

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