Expert Q&A; Done Answer fully thanks ATC 8-5 Ethical Dilemma Budget games Melody

Question

Expert Q&A; Done Answer fully thanks ATC 8-5 Ethical Dilemma Budget games Melody Lovelady is the most highly rewarded sales repeesentative ar Swift Corporation. Her secret to saccess is always to understate ber abilities. Ms. Lovelady is assignod to a territory in which her customer base is increasing at approximately 25 percent per year. Each year she estimates that her budgeted sales will be 10 percent higher than her previous year's sales. With little effort, she is able to double her budgeted sales growth. At Swift's annual sales meeting, she receives an award and a large bonus. Of course, Ms. Lovelady does not disclose her secret to her colleagues. Indeed, she always talks about how hard it is to continue to top her previous perfor- mance. She tells herself: "If they are dumb enough to fall for this rubbish, r'll milk it for all it's worth. Required a. What is the name commonly given to the budget game Ms. Lovelady is playing? b. Does Ms. Lovelady's behavior violate any of the standards of ethical professional practice shown in Exhibit 1.17 of Chapter 1? how Ms. Lovelady's budget game could be ped.

Explanation / Answer

a. This is called low balling.

Low balling means budgeting the sales estimates for such a quantity to top management, which is less than the quantity that can be easily sold by enterprise. It is done with the intention of showing to the management over achivement of the plan. This entitles them for claiming bonus and other such benefits.

b. She is violating the following ethical standards -

Integrity - such practices which would prejudice carrying out duties ethically

Competence - npt performing professional duties in accordance with relevant laws, regulations, and technical standards

Confidentiality - using the confidential information for illegal advantage

Credibility -  not communicating the information in a fair and objective manner

c. In such cases we should follow organisations established policies to handles such unethical behaviour.

If this does not help, we should discuss the issue with supervisor or to the next level of managment,  audit committee, executive committee, board of directors, board of trustees, or owners.

Clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethics Counselor.

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