Doug Depp Is the Manager at Chutes,Inc

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.

Correct Answer:

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a.Cost of goods sold will be less thus n...

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