Alicia Perez was controller of the vascular products division of a major medical instruments company. On December
Question:
The top managers of each division had a bonus plan that paid each a 10% bonus if operating income exceeded budgeted income by more than 20%. It was obvious to Perez that the vascular products division had easily exceeded the $180,000 of operating income needed for a bonus. In fact, she wondered if it would not be desirable to reduce operating income this yearafter all, the higher the income this year, the higher top management is likely to set the budget next year. Besides, if some of Decembers sales could just be held back and recorded in January, the division would have a running start on next year.
Perez had always been a team player, and she saw holding back sales as the best strategy for her team of managers. Therefore, she recorded only $1,500,000 of sales in 2012the other $100,000 was recorded as January 2013 sales. Operating income for 2012 then became $250,000 and there was a head start of $50,000 on 2013s operating income.
Comment on the ethical implications of Perezsdecision.
Step by Step Answer:
Introduction to Financial Accounting
ISBN: 978-0133251036
11th edition
Authors: Charles Horngren, Gary Sundem, John Elliott, Donna Philbrick