Reference no: EM131332512

To write a REPLY POST to GIVEN ANSWER. Minimum 350 words.

You can agree or disagree with given answer. It should be your own opinion.

Question:

Michael Wilson is a new production manager. After a great deal of effort, including considerable market research, he completes his budget and submits it to his boss, Susan Jones. Without even looking at it, she asks him what his "fudge factor" was and which items contained the most slack. Michael, very surprised, responds that he does not use any "fudge factor" and that all his figures are honest. Ms. Jones counters by asking him how he would respond if he had to cut about 20% from his budget as it is. She tells him that most budgets are trimmed in committee and he had better be ready. She returns the budget to him and tells him to come back with something reasonable.

GIVEN Answer:

Ethics is essential in accounting. Michael Wilson made a concerted effort to create a reasonable budget based off of market research. Michael's budget was laughed off by his boss Susan Jones, because it was not artificially inflated. Susan Jones knew that the committee would shave about 20% off of the budget.

Inefficiencies are sometimes created in corporations due to inflated budgets and the fear of having a budget decreased next year. When I was a teenager I used to work at a local water park as a supervisor. The manager used to be fearful of losing his budget for the next year. Even if the park was over-staffed on a certain day based off of the park's actual attendance, he would not send people home. The manager would focus on keeping as close to the budget as possible even if employees were just sitting around doing nothing. The manager knew that if he sent those employees home early, he would be well under budget and would have a smaller budget the following year.

I think it is important to have managers more like Michael Wilson. I feel like the water park manager was a manager similar to Susan Jones. They are both willing to waste money, willing to falsely inflate a budget. Michael Wilson's projections had to do with market analysis and results. Managers creating budgets that have a "fudge factor" of 20% are not doing any favors to the corporation. I company most efficiently operates when managers accurately report budgetary forecasts and are not increasing them in order to avoid the budgets being slashed.

I think that the committee and budgetary projections for the company need to be re-evaluated. Managers should come up projections based off of market projections just like Michael Wilson. In order to avoid false projections an independent consulting firm should be brought in to audit the manager's projections.

This is an issue that most likely often happens in the corporate world. Managers are afraid that their budgets will be slashed regardless of what numbers they project, so they are inherently encouraged to inflate their projections. I feel like the use of an independent consulting firm would help to solve this issue. Market projections would be evaluated for accurateness and a manager could possibly be fired for an inflated budgetary projection. Michael Wilson seems like an honest manager and a much more desirable employee compared to Susan Jones.