accounting
Table of Contents
Case 1
Introduction
Jill’s business is expanding while the up going GST prevent her from gaining more profits. The idea of replacing the labor with the help of new equipment will bring about an unprofitable break-even point. However Jill still insist on borrowing from bank to invest in the equipment regardless of the CVP analysis result, which raised some ethical issues.
Analysis
Question 1 Defining the stakeholders
There are 5 major stakeholders arising from Jill’s decision, which are Jill herself, the lending bank, the working staff, the Australian tax office, and the customers.
As the main owner of the business, (assuming Jill is a sole trader as the text implying), any significant decisions will directly effect her own property, which implies once the new equipment plan fails at making profits, the huge loss will bring herself to break down.
Banks who lend to Jill will also suffer from the bad debts if Jill’s profit does not cover her new purchasing equipment.
As the most easily overlooked group, working staff such as direct workers or managers, may face the issue of unemployment.
And the original issue arises from the increasing GST that Jill has to pay more tax to ATO, who is another stakeholder that directly pushes Jill to consider her new plan.
When Jill put her plan into reality, the customer of her product will also be affected, as the products may vary from previous ones when the new plan taken place.
Question 2
Ethical issues arising
As the text stated, Jill has done a complete CVP analysis, and the result does not support her purchasing the equipment, because of the unprofitable break-even point.
However Jill ignores this outcome deliberately. By dishonestly modifying the report as ‘direct cost may be reduced and the manufacturing fixed cost keep stable’, she tried to make the banks believe her new plan will benefit her business and finally lend money to her.
The ethical
Case 1
Introduction
Jill’s business is expanding while the up going GST prevent her from gaining more profits. The idea of replacing the labor with the help of new equipment will bring about an unprofitable break-even point. However Jill still insist on borrowing from bank to invest in the equipment regardless of the CVP analysis result, which raised some ethical issues.
Analysis
Question 1 Defining the stakeholders
There are 5 major stakeholders arising from Jill’s decision, which are Jill herself, the lending bank, the working staff, the Australian tax office, and the customers.
As the main owner of the business, (assuming Jill is a sole trader as the text implying), any significant decisions will directly effect her own property, which implies once the new equipment plan fails at making profits, the huge loss will bring herself to break down.
Banks who lend to Jill will also suffer from the bad debts if Jill’s profit does not cover her new purchasing equipment.
As the most easily overlooked group, working staff such as direct workers or managers, may face the issue of unemployment.
And the original issue arises from the increasing GST that Jill has to pay more tax to ATO, who is another stakeholder that directly pushes Jill to consider her new plan.
When Jill put her plan into reality, the customer of her product will also be affected, as the products may vary from previous ones when the new plan taken place.
Question 2
Ethical issues arising
As the text stated, Jill has done a complete CVP analysis, and the result does not support her purchasing the equipment, because of the unprofitable break-even point.
However Jill ignores this outcome deliberately. By dishonestly modifying the report as ‘direct cost may be reduced and the manufacturing fixed cost keep stable’, she tried to make the banks believe her new plan will benefit her business and finally lend money to her.
The ethical