Accounting Assignment: Budgeting, Ethical Implications, Excel Analysis

This accounting assignment solution focuses on the impact of sales revenue increases on a company's net income, specifically examining a scenario where a division manager, Carol Chadwick, is incentivized by a bonus system tied to net income exceeding budgeted figures. The solution calculates the bonus Carol would receive if she presented a budget with a 5% sales increase, while the actual growth was 12%. Furthermore, it delves into the ethical considerations of Carol potentially understating the budget to maximize her bonus, discussing the importance of responsibility, honest financial reporting, and avoiding conflicts of interest. The assignment emphasizes that ethical budgeting involves transparent decision-making and aligning financial priorities with the company's values, ensuring that officers do not prioritize personal profit over ethical considerations. Desklib provides access to this assignment solution along with a wealth of other solved assignments and past papers to support students in their academic journey.

Running head: ACCOUNTING ASSIGNMENT EXCEL
Accounting assignment excel
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ACCOUNTING ASSIGNMENT EXCEL
Table of Contents
Answer (a)..................................................................................................................................2
Answer (b)..................................................................................................................................2
Answer (c)..................................................................................................................................2
Answer (d)..................................................................................................................................3
Reference....................................................................................................................................5

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Answer (a)
Increase of sales revenue by 5%
Particulars
Current year
Budgeted
Current year
Actual Increase by 5%
Sales revenue $ 47,619,047.62 $ 50,000,000.00 $ 52,500,000.00
Cost of goods sold $ 28,571,428.57 $ 30,000,000.00 $ 31,500,000.00
Gross profit $ 19,047,619.05 $ 20,000,000.00 $ 21,000,000.00
Selling and administration expenses $ 15,000,000.00 $ 15,000,000.00 $ 15,000,000.00
Net income $ 4,047,619.05 $ 5,000,000.00 $ 6,000,000.00
Answer (b)
Increase of sales revenue by 12%
Particulars
Current year
Budgeted
Current year
Actual Increase by 12%
Sales revenue $ 47,619,047.62 $ 50,000,000.00 $ 56,000,000.00
Cost of goods sold $ 28,571,428.57 $ 30,000,000.00 $ 33,600,000.00
Gross profit $ 19,047,619.05 $ 20,000,000.00 $ 22,400,000.00
Selling and administration expenses $ 15,000,000.00 $ 15,000,000.00 $ 15,000,000.00
Net income $ 4,047,619.05 $ 5,000,000.00 $ 7,400,000.00
Answer (c)
If the Carol presents the budget showing 5% increase and the actual growth is 12%
then the budgeted net income will be $ 60,00,000 and actual net income will be $ 74,00,000.
Carol Chadwick, the division manager of Matteler, Inc’s Toys division is entitled to 20%
bonus for the amount of actual net income over the budgeted net income. Therefore, Carol
will be entitled to the bonus of ($ 74,00,000 - $ 60,00,000) * 20% = $ 280,000.
Answer (d)

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As the division manager, Carol Chadwick is entitled to 20% bonus for the amount of
actual net income in excess of the budgeted net income, her main intention behind presenting
the budget at lower amount is to earn significant bonus amount at the end of the year
(Henderson et al., 2015). Therefore, it’s not an easy job to motivate her to prepare and submit
the accurate budget for income statement as her personal interest is involved here. However
she can be motivated through explaining the following ethical issues –
 Responsibility – the ethical business arranges the financial house in such way that
reveals the deep understanding of its responsibilities to the shareholders, employees
and the community under which it operates. Further, the budgeting decisions include
the choices among the thoughtful dealings with regard to the consequence of the
company policies and improving the net earnings through cutting the corners
(Needles, Powers & Crosson, 2013).
 Honest books – honesty is regarded as the ethical principle at core of budgeting
procedure. If the budgeting numbers do not match with the actual one, it will be less
likely that the budget will provide the users with information and tools that are
required for determining the best way for allocating the resources those are consistent
with the values of the company (Mwasi, 2017).
 Conflict of the interest – ethical budget preparation focus on clearing the circumstance
where it involves conflict of the interest which in return can lead to dishonesty with
regard to allocation and accounting of resources. Further, the officers who earn
significant bonuses on the basis of company profits may prioritize the profit over the
ethical consideration (Whitecotton, Libby & Phillips, 2013).
Therefore, CEO shall explain the division manager that the ethical budgeting include
the decision making power to the people for whom the financial priorities are clear and
honest.

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Reference
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial
accounting. Pearson Higher Education AU.
Mwasi, R.M., 2017. Factors Affecting Budget Preparation: A Case Study of USIU-
Africa (Doctoral dissertation, United States International University-Africa).
Needles, B. E., Powers, M., & Crosson, S. V. (2013). Principles of accounting. Cengage
Learning.
Whitecotton, S., Libby, R., & Phillips, F. (2013). Managerial accounting. McGraw-Hill
Higher Education.