Ron Benson is an new production manager. After a great deal of effort, including
ID: 2442792 • Letter: R
Question
Ron Benson is an new production manager. After a great deal of effort, including considerable market research, he completes his budget and submits it to his boss, Diane Moran. Without even looking at it, she asks him what his "fudge factor" was, and which items contained the most slack. Ron, very surprised, responds that he doesn't use any "fudge factor," and that all his figures are honest. Ms. Moran counters by asking him how he would respond if he had to cut about 20% from the budget, as it is. She tells him that most budgets are trimmed in committee, and he had better be ready. She returns the budget to him, and tells him to come back with something reasonable.1. Is it ethical to build slack into a budget? Explain.
2. Was it ethical for Ms. Moran to refuse to accept a budget without slack. Briefly explain.
Explanation / Answer
1.Yes. Slack may be considered as an estimate of how much the actual results may vary from the estimates. As such, it is perfectly legitimate to add some slack, as in this case. On the other hand, it is certainly possible that a great deal of padding may be added to a budget, with the manager preparing the budget hoping that the amount to be trimmed will not exceed the amount of the padding. The decision as to whether the addition of slack is unethical depends upon whether budgeting guidelines are followed. Any secretive method of adding padding to one's own budget would be unethical.
2. As Ron Benson's superior, Ms. Moran has the obligation to correct his mistakes. Apparently, in this particular company, budgets are trimmed in committee, with the expectation that all budgets contain some expenses that could be eliminated without any harm to the company itself. Ron Benson must continue to be honest. One way to do that would be for Besnson to submit his trimmed budget, and then foot note the costs that are most likely to exceed the budget with the amount. This would give Ms. Moran the ability to intelligently defend his budget while representing in committee.
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