You are the sales manager at Castle Sight & Sound, a store that sells high-end televisions, sound

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You are the sales manager at Castle Sight & Sound, a store that sells high-end televisions, sound systems, and video and computer equipment. Among the various television models are two Pioneer 50-inch digital TVs, one in a black case, purchased through regular channels for $2,600, and the other in a silver case, purchased in a wholesaler's liquidation sale for $1,400. Because the two TVs are identical except for the colour of the case, they have been priced to sell at $3,999.99. This price is competitive with other outlets that are selling similar TVs.
One of your sales reps calls you from the display floor. She has a customer interested in the digital TV with the black case who is willing to pay the asking price of $3,999.99. As you are talking to her, you remember that the digital TV with the silver case was acquired at a much lower cost. Castle Sound uses the specific identification cost method for the high-end equipment that it sells. The following idea occurs to you: if the company sells the digital TV with the black case, it will make a gross profit of $1,399.99. However, if the sales rep were to offer the customer a $200 discount if he bought the digital TV with the silver case, the company will make a gross profit of $2,399.99. You may even be able to get part of the additional $1,000 as a bonus.

Required:
Should you ask the sales rep to offer the $200 discount to the customer if he is willing to buy the digital TV with the silver case? Why or why not? Are there any ethical issues involved in this decision?
Liquidation
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due....
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Related Book For  book-img-for-question

Financial Accounting A User Perspective

ISBN: 978-0470676608

6th Canadian Edition

Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry

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