KJ Company manufactures furniture and carriages for infants. The accounting staff is currently preparing next year’s budget. Kyle Lansing is new to the firm and is interested in learning how this process occurs. He has lunch with the sales manager and the production manager to discuss further the planning process.
Over the course of lunch, Kyle discovers that the sales manager lowers sales projections 5 to 10 percent before submitting her figures, while the production manager increases cost estimates by 10 percent before submitting his figures. When Kyle asks about why this is done, the response is simply that everyone around here does it.
a. What do the sales and production managers hope to accomplish by their methods?
b. How might this backfire and work against them?
c. Are the actions of the sales and production managers unethical?