Lucy Clark is the sales representative for a heavy construction equipment man¬ ufacturer. She is compensated by a moderate fixed salary plus a 5 percent bonus on sales. Lucy is aware that some of the higher-priced items earn the company a lower contribution margin and some of the lower-priced items earn the com¬ pany a higher contribution margin. She learned this information from the var¬ iable costing financial statements provided by the company.

Lucy has recently started pushing sales of only the high-priced items by generously entertaining receptive customers and offering them gifts through the company’s promotion budget. She feels that management has not given her ad¬ equate raises in the 20 years she has been with the company and now she is too old to find a better job.

a. Is what Lucy doing legal?

b. What are the ethical issues involved in the case from Lucy’s standpoint?

c. Are there ethical issues in the case from company management’s standpoint?

d. What do you believe Lucy should do? Why?

LO1