Case 12-44<\/b><\/p>\n
Jason Kemp was torn between conflicting emotions. On the one hand, things were going so well. He had just completed six months as the assistant financial manager in the Electronics division of Med-Products Inc. The pay was good, he enjoyed his coworkers, and he felt that he was part of a team that was making a difference in American health care. On the other hand, his latest assignment was causing some sleepless nights. Mel Cravens, his boss, had asked him to \u201crefine\u201d the figures on the division\u2019s latest project\u2014a portable imaging device code\u2014name ZM. The original estimates called for investment of $15.6 million and projected annual income of $1.87 million. Med-Products required a ROI of at least 15% for new project approval. So far, ZM\u2019s rate of return was nowhere near that hurdle rate. Mel encouraged him to show increased sales & decreased expenses in order to get the projected income above $2.34 million. Jason asked for a meeting with Mel to voice his concerns.<\/p>\n
Jason<\/b>: Mel, I\u2019ve gone over the figures for the new project and can\u2019t find any way to get the income above $1.9 million. The salespeople have given me the most likely revenue figures, and productions feels that the expense figures are solid.<\/p>\n
Mel<\/b>: Jason, those figures are just projections. Sales doesn\u2019t really know what the revenue will be. In fact, when I talked with Sue Harris, our sales vice president, she said that sales could range from $1.5 million to $2.5 million. Use the higher figure. I\u2019m sure this product will justify our confidence in it!<\/p>\n
Jason<\/b>: I know the range of sales was that broad, but Sue felt the $2.5 million estimate was pretty unlikely. She thought that during the first 5 years or so that ZM slaes would stay in the lower end of the range.<\/p>\n
Mel: <\/b>Again, Sue doesn\u2019t know for sure. She\u2019s just estimating. Let\u2019s go with the higher estimate. We really need this product to expand our line and to give our division a chance to qualify for sales-based bonuses. If ZM sells at all, our revenue will go up, and we\u2019ll all share in the bonus pool!<\/p>\n
Jason: <\/b> I don\u2019t know, Mel. I feel pretty bad signing off on ROI projections that I have so little confidence in.<\/p>\n
Mel: <\/b>(frustrated) Look, Jason, just prepare the report. I\u2019ll back you up.<\/p>\n
Required:<\/b><\/p>\n
1. What is the ROI of project ZM based on the initial estimates? What would ROI be if the income rose to $2.34 million?<\/p>\n
2. Do you agree that Jason has an ethical dilemma? Explain. Is there any way that Mel could ethically justify raising the sales estimates and\/or lowering expense estimates?<\/p>\n
3. What do you think Jason should do? Explain.<\/p>\n","protected":false},"excerpt":{"rendered":"
Case 12-44 Jason Kemp was torn between conflicting emotions. On the one hand, things were going so well. He had just completed six months as the assistant financial manager in the Electronics division of Med-Products Inc. The pay was good, Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-49425","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/49425","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=49425"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/49425\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=49425"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=49425"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=49425"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}