After a decade of consistent income growth the cranor

Reference no: EM13390199

After a decade of consistent income growth, the Cranor Corporation sustained a before-tax loss of $8.4 million in 2013. The loss was primarily due to $10 million in expenses related to a product recall. Cranor manufactures medical equipment, including x-ray machines. The recall was attributable to a design flaw in the manufacture of the company's new line of machines.

The company controller, Jim Dietz, has suggested that the loss should be included in the 2011 income statement as an extraordinary item. "If we report it as an extraordinary item, our income from continuing operations will actually show an increase from the prior year. The stock market will appreciate the continued growth in ongoing profitability and will discount the one-time loss. And our bonuses are tied to income from continuing operations, not net income."

The chief executive officer asked Jim to justify this treatment. "I know we have had product recalls before and, of course, they do occur in our industry," Jim replied, "but we have never had a recall of this magnitude, and we fixed the design flaw and upgraded our quality control procedures."

Required:

Discuss the ethical dilemma faced by Jim Dietz and the company's chief executive officer.

Reference no: EM13390199

Questions Cloud

Historically demand for roses has never been less than 20 : every morning a florist must decide how many dozens of roses to stock. roses have a shelf life f only one day but at

Determine the point that maximizes consumers utility given : consider a consumer with utility ux y radicxy . the consumer has 100 to spend and the price of x is 5 and the price of

Examine the pros and cons from the perspective of crestview : read the case study titled ldquomissed opportunitiesrdquo located in the online course shell.write a four to six 4-6

When a firm selects to structure its processes at the flow : if a firm chooses to structure its processes at the flow shop end of the process continuum that firm typically will be

After a decade of consistent income growth the cranor : after a decade of consistent income growth the cranor corporation sustained a before-tax loss of 8.4 million in 2013.

Assume that the probability of a booming demand state is 03 : a decision-maker has to choose from among four mutually exclusive capacity options. each option has a payoff associated

Find equilibrium price and quantity and describe its : for this assignment choose a major publicly traded automotive producer such as general motors ford toyota or

In industry x customers are becoming less interested in the : in industry x customers are becoming less interested in product variety and more interested in a low price. process

What would be the expected change to a 30-year bonds market : 1.given the data below calculate the expected return variance and standard deviation of the following company.in a

User Account

All Pages