Company D's top managementis growing concerned that one of itsdivisions,Division D,will not be able to meet its current period income goals.Division Duses absorption costing for internal profit reporting and had an adequate level of inventory at the beginning of the period.Division D's managerknows that he can raise profits by increasing production at the end of the period.The increased production will allocate fixed costs over a greater number of units.This,in turn,willreduce cost of goods sold and increase earnings.However,it is unlikely that theadditional production will be sold,resulting in a large ending inventory balance.

The manager of Division Dhas come to Alfonso Yates,the divisional controller,to find outexactly how much additional production is needed to increase net income enough to meet the division's profit goals.Alfonso analyzes Division D's financial numbersand determines that the division will need to increase inventory by25%in order to absorb enough fixed costs to meet the division's income goal.Alfonso reports this information to the Division Dmanager.

Is Alfonso acting ethically?