Linda butler is the new division controller of the snack-foods division of daniel foods. daniel foods has reported a minimum 15% growth in annual earnings for each of the past 5 years. the snack-foods division has reported annual earnings growth of more than 20% each year in this same period. during the current year, the economy went into a recession. the corporate controller estimates a 10% annual earnings growth rate for daniel foods this year. one month before the december 31 fiscal year-end of the current year, butler estimates the snack-foods division will report an annual earnings growth of only 8%. rex ray, the snack-foods division president, is not happy, but he notes that the "end-of-year actions" still need to be taken. butler makes some inquires and is able to compile the following list of end-of-year actions that were more or less accepted by the previous division controller.
requirement 1. why might the snack-foods division president want to take these end-of-year actions?
(1) daniel foods may have a division bonus scheme based on one-year reported division earnings. efforts to (2) or transfer ( can increase this bonus. ( top management of daniel foods likely wil view those division managers that deliver ( as being the best prospects for promotion. ( if top management of daniel foods adopts a (7) approach, divisions that report (8) may attract a sizable increase in top mangement supervision.
requirement 2. butler is deeply troubled and reads the "standards of ethical behavior for practitioners of management accounting and financial management: . classify each of the end-of-year actions (a-g) as acceptable or unacceptable according to that document.
determine whether each of the end-of-year actions is in clear violation (violation), is clearly in compliance with (no violation), or may be in violation with (possible violation) the "standards of ethicla behavior for practitioners of management accounting and financial management".
a. deferring december's routine montly maintenance on packaging equipment by an independent contractor until january of next year.
b. extending the close of the current fiscal year beyond december 31 so that some sales of next year are included in the current year.
c. altering dates of shipping documents of next january's sales to record them as sales in december of the current year.
d. giving salespeople a double bonus to exceed december sales targets.
e. deferring the current period's advertising by reducing the number of television sports run in december and running more than planned in january of next year.
f. deferring the current period's reported advertising costs by have daniel foods' outside advertising agency delay billing december advertisements until january of next year or by having the agency alter invoices to conceal the december date.
g. persuading carriers to accept merchandise for shipment in december of the current year although they normally would not have done so.
requirement 3. what should butler do if ray suggests that these end-of-year actions are taken in every division of daniel foods and that she will grealy harm the snack-foods division if she does not cooperate and paint the rosiest picture possible of the division's results?
a. butler should contact legal counsel. if legal counsel is unwilling to take legal action against ray, then butler should resign.
b. butler should resign immediately.
c. butler should follow ray's request. if the other divisions of daniel foods are taking the same actions, then the snack-food division should do the same in order to maintain consistency among the divisions.
d. butler should first directly raise her concerns with ray. if ray is unwilling to change his request, butler should discuss her concerns with the corporate controller of daniel foods. in the extreme, she may want to resign if the corporate culture of daniel foods is to reward division managers who take "end-of-year actions" that butler views as unethical and possibly illegal.
daniel foo