CVP Analysis—Ethical Issues
Mark Ting desperately wants his proposed new product, DNA-diamond, to be accepted by top management. DNA-diamond is a piece of jewelry that contains the DNA of a boy- or girlfriend, spouse, or other loved one. Top management will not approve this product in view of its high break-even point.
Mark knows that if he can reduce the fixed costs in his proposal, then the break-even point will be reduced to a level that top management finds acceptable. Working with a friend in the company’s finance department, Mark finds ways to credibly misstate the estimated fixed costs of producing DNA-diamonds below those that any objective person would estimate.
Mark knows that if the product is successful (and he is certain that it will be), then top management will not find out about the understatement of fixed costs. Mark believes that this product, once it is successful, will benefit the shareholders and employees of the company.
Required:
Are Mark’s actions ethical? Explain.
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