Ethics Case

1. Ryan’s ethical dilemma is to manipulate the cost budget to keep the price competitive so that the VP of Sales, Sid, can make his quota for the year. Ryan is being asked to remove the quality testing and maintenance from variable costs and make them fixed costs to allow the selling price to drop from $6.00 to $5.30. Sid, the VP of sales is using his status in the company to take advantage of Ryan. Ryan, a new hire, wants to be on good terms with everyone and this is just putting him in a compromising situation. This could really harm Ryan’s integrity within this organization, his credibility will also be harmed making the company look bad and in the end Ryan may lose his job. It was said that the policy in this company is that they MUST make a contribution margin of $2.00 per unit, have a pre-tax profit of 85,000 and Sid has to sell 200,000 units. With this policy is mind, Sid wants to just change the numbers to satisfy his goals and doesn’t keep the company as a whole in mind.
2. The stakeholders that will be affected by how Ryan responds to the VP of Sales proposal would be the shareholders of the company, the creditors, the competitors and most importantly every division in this company. The quality testing and maintenance would have to stop what they have been told to do in the past years and have a fixed schedule. They could lose labor hours in this position and they may not make as much money as they used to. The shareholders of the company will be affected because they may be selling more units but this could allow the competitors to lower their prices again and then this company may be put in another compromising position. The shareholders also may not want to be involved with a company that uses unethical practices, they will lose all of their trust in the company and moral could be down. They will be misinformed what the budget is and will not understand why these variable costs are now fixed costs. Creditors may say that they will not want to be