Instructions Read the following scenario and address the questions below : Pleas
ID: 425334 • Letter: I
Question
Instructions Read the following scenario and address the questions below :
Please respond to the following questions in your initial post:
1) Is the plant manager’s assessment of the effects of increased production on the contribution margin correct? Why, or why not?
2) Are the manager’s actions ethical? Are they legal? Explain your answer and provide support using at least one credible source.
3) Should Susan present the manager’s proposal to the Board of Directors? Why or why not? Provide justification for your answer and support it with at least one credible source in addition to your text.
Be sure to support your responses with credible sources and cite your sources using APA. Please answer all of the questions, if you can not answer all of the questions do not reply.
Bay City Tires Inc. Business Decisions Susan is a managerial accountant for Bay City Tires, Inc. Bay City manufactures tires for passenger automobiles at a plant on the outskirts of town. They also produce tires for commercial equipment at a dockside facility on Lake Michigan. Due to the recent down-turn in the economy, Bay City has lost sales and been forced to reduce prices. One of Susan's responsibilities is to prepare and present the company's financial plan for the upcoming year to the senior executives and the board of directors. In this capacity, Susan asks the two plant managers to prepare a budget. While reviewing these budgets for the presentation, Susan notices that the budget for the Dockside facility includes a Profit Graph that projects an increase in profits and a lower break-even point. Curious as to how this would be possible given sales and product prices have declined, Susan asks Jack, the Dockside manager to explain. Jack, explains that a planned increase in worker productivity would reduce per unit variable costs, thereby increasing their contribution margin.Explanation / Answer
1. The increased production on account of higher productivity will not be a sustainable proposition, given the decline in sales and reduction in the contribution per unit due to reduced prices. Increased production will not increase the demand of the tires, given the state of economy. As a result, the production of more units will only add to the increased inventory cost for the company, besides putting extra load on company's resources.
2. The managers' actions are not ethical as the excessive workload will not only put undue strain on the work performance and will affect overall well being of the workers besides doing little for productivity. These actions may also land the company in legal trouble with retaliation and discrimination lawsuits being brought against the company by the affected workers.
3.Susan should not present the proposal to the board because increasing the workload to produce more will not help the company in any case. It may result in unsold inventory and would put it face to face with issues arising out of restraining of an already pressurised workforce.