BTN 11-3 Cannon Bly is a sales manager for an automobile dealership. He earns a bonus each year...

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BTN 11-3 Cannon Bly is a sales manager for an automobile dealership. He earns a bonus each year based on revenue from the number of autos sold in the year less related warranty expenses. Actual warranty expenses have varied over the prior 10 years from a low of 3% of an automobile’s selling price to a high of 10%. In the past, Bly has tended to estimate warranty expenses on the high end to be conservative. He must work with the dealership’s accountant at year-end to arrive at the warranty expense accrual for cars sold each year. 1. Does the warranty accrual decision create any ethical dilemma for Bly? 2. Since warranty expenses vary, what percent do you think Bly should choose for the current year? Justify your response. Detailed analysis Please

Robert · Accepted Answer

1. Lowering the bonus guarantee costs from the bonus which is paid with the sales manager, 
increases the ability of the sales manager to work effectively. The sales manager must 
take care when they attend the claims during the warranty period. He seems to be right, if 
he is reasonable,

BTN 11-3 Cannon Bly is a sales manager for an automobile dealership. He earns a bonus each year based on revenue from the number of autos sold in the year less related warranty expenses. Actual...

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