Jackson Daniels Case Study


Jackson Daniels graduated from Lynchberg State College two years ago. Since graduating from the college, he has worked in the accounting department of Lynchberg Manufacturing. Daniels was recently asked to prepare a sales budget for the year 2011. He conducted a thorough analysis and  came out with projected sales of 250,000 units of product. That represents a 25  percent increase over 2010.

Daniels went to lunch with his best friend, Jonathan Walker, to celebrate the completion of his first solo job. Walker noticed Daniels seemed very distant. He asked what the matter was.

Daniels stroked his chin, ran  his hand through his bushy, black hair, took another drink of scotch, and  looked straight into the eyes  of his friend  of 20  years. ‘Jon, I think I made a mistake with the budget.’

What do  you mean? Walker answered.

You know how we developed a new process to manufacture soaking tanks to keep the ingredients fresh?

Yes, Walker answered.

Well, I projected twice the level of sales for that product than will likely occur. Are you sure, Walker asked.

I checked my numbers. I’m sure. It was just a mistake on  my part, Daniels replied. So, what are  you going to do  about it, asked Walker.

I think I should report it to Pete. He’s the one  who acted on  the numbers to hire additional workers to produce the soaking tanks, Daniels said.

Wait a second, Walker said. How do  you know there won’t be extra demand for the product? You and  I both know demand is a tricky number to project especially when a new product comes on  the market. Why don’t you sit back and  wait to see what happens?

But what happens if I’m right and  the sales numbers were wrong? What happens if the demand

does  not increase beyond what I now know to be the correct projected level, Daniels asks. Well,  you can tell Pete about it at that time. Why raise a red  flag now when there may be no need?â? Walker states.

As the lunch comes to a conclusion, Walker pulls Daniels aside and  says,  Jack, this could mean your job. If I were in your position I’d protect my own interests first.

  1. What should an employee do when he or she discovers that there is an error in a projection? Why do you suggest that action? Would your answer change if the error was not likely to affect other aspects of the operation  such as employment? Why or why not?
  2. Identify the stakeholders potentially affected by what Daniels decides to do. How might each stakeholder be affected by Daniels’s action and  decision? Use ethical reasoning to support your answer.
  3. Assume Daniels is both a CPA and holds the Certified Management Accountant (CMA) certification granted by the IMA. Use the ethical standards of these two  organizations to identify what Daniels should do  in this situation.