William Bill is the production manager for Cheetah Motors Ltd and is responsible for preparing the production budget for the Cheetah car that the company manufactures. During the previous year, new robots were installed on the production line that significantly increased fixed factory overheads but reduced the amount of labour involved in production and the amount of material wasted due to improved efficiency. In preparing the production budget for the next year, William decided to ‘cut himself a bit of slack’. Because the cost structure of the production line had changed so much as a result of the new robots, William decided that in the first year of their introduction he would set a production budget that was easy to meet and management would not be able to recognise this as they couldn’t compare it with previous production budgets. William received a bonus if positive production variances were greater than 10%. By not reducing the amount of labour or materials costs in the budget by the amount that the new robots should save, William believed he was in for an easy year with a guaranteed bonus at the end.

Required

A. Who are the stakeholders affected by William’s budget?

B. What are the ethical issues involved, if any?

C. How could the company stop its managers padding their budgets?