1-34 Budgeting, ethics, pharmaceutical company. Chris Jackson was recently promo
ID: 2583232 • Letter: 1
Question
1-34 Budgeting, ethics, pharmaceutical company. Chris Jackson was recently promoted to Controller of Research and Development (R&D;) for BrisCor, a Fortune 500 pharmaceutical company that manufactures prescription drugs and nutritional supplements. The company's total R&D; cost for 2017 was expected (bud geted) to be S5 billion. During the company's midyear budget review, Chris realized that current R&D; expen ditures were already at $3.5 billion, nearly 40% above the midyear target. At this current rate of expenditure, the R&D; division was on track to exceed its total year-end budget by $2 billion! In a meeting with CFO Ronald Meece later that day, Jackson delivered the bad news. Meece was both shocked and outraged that the R&D; spending had gotten out of control. Meece wasn't any more under- standing when Jackson revealed that the excess cost was entirely related to research and development of a new drug, Vyacon, which was expected to go to market next year. The new drug would result in large profits for BrisCor, if the product could be approved by year-end. CHAPTER 1 THE MANAGER AND MANAGEMENT ACCOUNTING Meece had already announced his expectations of third-quarter earnings to Wall Street analysts. If the R&D; expenditures weren't reduced by the end of the third quarter, Meece was certain that the tar- gets he had announced publicly would be missed and the company's stock price would tumble. Meece instructed Jackson to make up the budget shortfall by the end of the third quarter using "whatever means necessary." Jackson was new to the controller's position and wanted to make sure that Meece's orders were fol- lowed. Jackson came up with the following ideas for making the third-quarter budgeted targets:Explanation / Answer
answer to question 1
Resolution of Ethical Conflict
In applying the Standards of Ethical Professional Practice, you may encounter problems identifying unethical behavior or resolving an ethical conflict. When faced with ethical issues, you should follow your organization's established policies on the resolution of such conflict. If these policies do not resolve the ethical conflict, you should consider the following courses of action:
In the given cases a to c , the acceptabl policy is a as in that there is no harm from the companys point of view to the stakeholders though there would be a delay in benefits to be accrued in the future.
and b,c are unacceptable as the basic requirement is to comply with GAAP.
Answer to question 2
option a is advisable to the company for fair business.
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