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Question - Patty Gasso is the sales manager for a tractor supply company. She earns an annual bonus based on sales minus related warranty expenses. Actual warranty expenses have varied over the past 15 years from a low of 2% of sales to a high of 10%. In the past, Gasso has recommended an estimate on the high side of the range in order to be conservative.
Required -
1. Does having the ability to make warranty accrual recommendations create an ethical dilemma for Gasso? If so, explain why.
2. What percent would you recommend if you were Gasso?
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