Chapter 11
Cameron Bly is a sales manager for an automobile dealership. Heearns a bonus each year based on revenue from the number of autossold in the year less related warranty expenses. Actual warrantyexpenses have varied over the prior 10 years from a low of 3% of anautomobile's selling price to a high of 10%. In the past, Bly hastended to estimate warranty expenses on the high end to beconservative. He must work with the dealership's accountant atyear-end to arrive at the warranty expense accrual for cars soldeach year.
- Does the warranty accrual decision create any ethicaldilemma for Bly?
- Since warranty expenses vary, what percent do you thinkBly should choose for the current year? Justify yourresponse.
