Doug Depp Is the Manager at Chutes,Inc

question 34

Essay

Doug Depp is the manager at Chutes,Inc.that sells parachutes.Management's next year's bonus is based on the current year's net income.In an effort to increase his bonus,Doug decides to buy the pull-cord used in making the company's parachutes from a less reputable supplier.The supplier's prices are lower,but the pull-cords are less reliable in successfully opening the parachute.
a.Explain how net income will be higher if the cheaper pull-cord is used in the parachutes sold to Chutes,Inc.'s customers.
b.Discuss whether Doug is acting in the best interest of the company and its owners.
c.Discuss the ethical issue and what the consequences of Doug's actions may be.

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Definitions:

Demand Smoothing

Techniques used to reduce volatility in demand by managing and anticipating consumer or production needs.

Chase Strategy

A planning strategy that sets production equal to forecasted demand.

Planning Horizons

The time period over which forecasts or plans are made, guiding strategic and operational decisions in an organization.

Demand Options

Various strategies a company can use to manage or influence customer demand for its products or services.