Managerial Accounting Topic: Ethical Problems with Budgeting
- Read the following Vignette.
The controller of Tree Huggers Paper Company, a company that uses scrap from lumber yards to make eco-friendly note cards, has just received two forecasts for sales in the West Coast District for the coming year. Based on an analysis of consumer spending and economic trends, a marketing research firm estimates sales of $1 million for next year. Suzanne Winters, the district sales manager, estimates sales of only $850,000.
The controller wants your advice on the estimate that should be used in developing next year's budget.
Respond to the questions below. Be sure to properly cite at least one reference to support your position.
- What are two possible explanations for the difference between the marketing firm's estimate and Ms. Winters'?
- Suppose that instead of $850,000, Ms. Winters' estimates $1.1 million in sales. What are two possible explanations for the difference between the marketing firm's estimate and Ms. Winters'?
- Does any of the explanations suggest unethical behavior by Ms. Winters?