Tae Franklin Is the Sales Manager of Darius Enterprises, a Very

question 36

Essay

Tae Franklin is the sales manager of Darius Enterprises, a very profitable distributor of office furniture to local businesses. A recent economic downturn has created an extremely tight cash position, and the company has been hurt by the bankruptcy of two key customers.
In late October, anticipating an economic recovery, Franklin began an extensive remodeling of the company's sales floor. Construction costs, decorating, and equipment purchases are projected to cost $250,000.
Darius has a policy that individual expenditures in excess of $200,000 must be approved by the firm's board of directors. Franklin, unfortunately, missed the deadline to have the board consider this project at its regular September meeting. Not wanting to wait until the next meeting in December, he subdivided the project in two parts-construction and decorating ($190,000) and equipment purchases ($60,000)-neither of which needed board approval because of the dollar amounts involved.
The project was recently completed and sales have begun to recover. Customers have raved about the new sales area, noting that it is far superior to those of Darius's competitors.
A. Would Franklin's approach of subdividing the project in two parts have any effect on the company's financial statements? Briefly explain.
B. Briefly discuss whether Franklin behaved in an ethical manner.
C. Which, if any, of the following standards of conduct would have applicability to Franklin's conduct: competence, confidentiality, integrity, or credibility? Briefly explain.

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Definitions:

Marginal Propensity

Marginal propensity refers to the proportion of an additional income that an individual consumes rather than saves.

Additional Income

Income that is received in addition to the primary source of income, such as earnings from side jobs or investments.

Permanent Increase

A long-term or indefinite rise in the level or amount of something, such as income, output, or investments.

Federal Budget Deficits

Occurs when a government's total expenditures exceed the revenue that it generates, excluding debt from previous years.