Explain how this situation could have been avoided and who is responsible for the issue.

Your company is considering paying a commission to the sales force to expand
sales. You are charged by the Chief Financial Officer with 1) computing a new
breakeven point, and 2) the operating profit increase by 20% with the new sales
commission plan.
You spend the next
week gathering information, analyzing the information, and performing various
cost-volume-profit analysis. You generate a report showing the new plan should
lead to a substantial increase in sales with a minimum increase in breakeven
sales. You create a memo explaining this report and the president of the
company is pleased with your information and plans to implement it.
A few days later you
review your numbers and realize your analysis has missed using the sales
personnel’s monthly salary and the fixed selling costs. You re-calculate your
numbers and realize the results are drastically different.

You are unsure if you
should report this new results to the CFO, who will have to tell the president
of the error. Since you are new to the company, you are wondering what will
happen if you do and do not report this issue.

1. Explain the issues
with excluding the monthly salary and fixed selling costs in the calculation and
why they are important.
2. What ethical issues
do you need to understand, based on the results of your original and revised
calculations?
3. Explain how this
situation could have been avoided and who is responsible for the issue.

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