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ACCT 505 Week 3 Case Study 4–20 Ethics and the Manager
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CASE 4–20 Ethics and the Manager, Understanding the Impact of
Percentage Completion on Profit—Weighted-Average Method [Course
Objective B] Gary Stevens and Mary James are production managers in
the Consumer Electronics Division of General Electronics Company,
which has several dozen plants scattered in locations throughout the
world. Mary manages the plant located in Des Moines, Iowa, while Gary
manages the plant in El Segundo, California. Production managers are
paid a salary and get an additional bonus equal to 5% of their base salary
if the entire division meets or exceeds its target profits for the year. The
bonus is determined in March after the company’s annual report has
been prepared and issued to stockholders.
Shortly after the beginning of the New Year, Mary received a phone call
from Gary that went like this:
Gary: How’s it going, Mary?
Mary: Fine, Gary. How’s it going with you?
Gary: Great! I just got the preliminary profit figures for the division for
last year and we are within $200,000 of making the year’s target profits.
All we have to do is pull a few strings, and we’ll be over the top!
Mary: What do you mean? Gary: Well, one thing that would be easy to
change is your estimate of the percentage completion of your ending