Javier Gonzales is the manager of the Repairs and Maintenance Department of JG Industries. He is responsible for preparing his department's annual budget. Most managers in the company inflate their budget numbers by at least 10 percent because their bonuses depend upon how much below budget their departments operate. Gonzales turned in the following information for his department's 20x9 budget to the company's budget committee:

Because the figures for 20x9 are 20 percent above those in the 20x8 budget, the budget committee questioned them. Gonzales defended them by saying that he expects a significant increase in activity in his department in 20x9.
What do you think are the real reasons for the increase in the budgeted amounts? What ethical considerations enter into this situation?

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Budget 20x8 Actual 20x8 Budget 20x9 Supplies Labor Utilities Tools Hand-carried equipment Cleaning materials Miscellaneous Totals $20,000 80,000 8,500 12,500 25,000 4,600 2,000 $152,600 S 16,000 82,000 8,000 9,000 16,400 4,200 2,100 $137,700 $ 24,000 96,000 10,200 15,000 30,000 5,520 2,400 $183,120