Concept explainers
Spencer Wilkes is the marketing manager at Darby Company. Last year, Spencer recommended the company approve a capital investment project for the addition of a new product line. Spencer’s recommendation included predicted
Spencer wants to shift some sales from the second year of the project into the first year. Doing so will make it appear that his cash flow predictions were accurate. With accurate estimates, he will be able to avoid a poor performance evaluation. Spencer has discussed his plan with a couple of key sales representatives, urging them to report sales in the current month that will not be shipped until a later month. Spencer has justified this course of action by explaining that there will be no effect on the annual financial statements because the project year does not coincide with the fiscal year––by the time the accounting year ends, the sales will have actually occurred.
Requirements
- 1. What is the fundamental ethical issue? Who are the affected parties?
- 2. If you were a sales representative at Darby Company, how would you respond to Spencer’s request? Why?
- 3. If you were Spencer’s manager and you discovered his plan, how would you respond?
- 4. Are there other courses of action Spencer could take?
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