Ethical Dilemma The Precision Parts Corporation manufactures automobile parts. T

Question

Ethical Dilemma The Precision Parts Corporation manufactures automobile parts. The company has reported a profit every year since the company's inception in 1980. Management prides itself on this accomplishment and believes one important contributing factor is the company's incentive plan that rewards top management a bonus equal to a percentage of operating income if the operating income goal for the year is achieved. However, 2016 has been a tough year, and prospects for attaining the income goal for the year are bleak. Tony Smith, the company's chief financial officer, has determined a way to increase December sales by an amount sufficient to boost operating income over the goal for the year and secure bonuses for all top management. A reputable customer ordered $120,000 of normally stocked parts to be shipped on January 15, 2017. Tony told the rest of top management "I know we can get that order ready by December 31. We can then just leave the order on the loading dock until shipment. I see nothing wrong with recognizing the sale in 2016, since the parts will have been manufactured and we do have a firm order from a reputable customer." The company's normal procedure is to ship goods f.o.b. destination and to recognize sales revenue when the customer receives the parts

Explanation / Answer

According to this specific case tony has a strong standpoint of making bonus for the top management as well as improving the situation of the organisation.

First point that should be considered is that Tony is asking for manufacturing the product according to the capacity of the company which would definitely increase the overall time utilised by the manufacturing inside the company.

Early manufacturing would also provide a better support for creating sales strategy for next year and engagement in the upcoming programs would also be very efficiently done. It would also benefit the company bye practically using the shipment earlier than the expected which would be faster to ship the product as it would be free existing At The loading Dock.

Third point which we should consider in favour of Tony that the probability of delay in manufacturing of the product would be outrun as the products are going to be manufactured. It would increase the companies reliability as the product is going to be delivered to a reputed customer which frequently orders for the company.

As per the above factors we can easily say that Tony is right in asking for creating the good at an early stage which would benefit the employees of the organisations as well as the organisation itself.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.