needed to maintain the minimum cash balance of $50,000. A budgeted income statement for the three-month period ending June 30. Use the contribution approach 4. 3. A budgeted balance sheet as of June 30. ETHICS CHALLENGE LO8-1 Granger Stokes, managing partner of the venture capital firm of Halston and Stokes, was dissatisfied with the top management of PrimeDrive, a manufacturer of computer disk drives. Halston a invested $20 millio several years. In a as the major nd Stokes had n in Prime Drive, and the return on their investment had been below expectations for tense meeting of the board of directors of PrimeDrive, Stokes exercised his firm's rights equity investor in PrimeDrive and fired PrimeDrive's chief executive officer (CEO). He thern oved to have the board of directors of PrimeDrive appoint himself as the new CEO Stokes prided himself on his hard-driving management style. At the first management meeting, he asked two of the managers to mpany. At the budget review meeting that followed, he ripped up the departmental budgets that had en submitted for his review and yelled at the managers for their "wimpy, do ordered everyone to submit new budgets calling for at least a 40% increase in that he would not accept excuses for results that fell below budget. stand and fired them on the spot, just to show everyone who was in control of the co nothing targets," He then sales volume and an nounced Master Budgeting PrimeDrive, discove red toward her boss had not been scrapping derective disk drives that had been returnedi her customers to avoid booking losses. Keri Kalani, an accountant working for the production manager at customers. Instead, he had been shipping them in new cartons to other cust Quality control had deteriorated during the year as a result of the push for increa of defective disk drives were running as high as 15% of the new boss with her discovery, he told her to mind her own business. And then, to justify hst of us managers are finding ways to hit Stokes's targets." returns hen she confronted her drives shipped. W he said. "A Required: 1. Is Granger Stokes using budgets as a planning and control tool? 2. What are the behavioral consequences of the way budgets are being used at PrimeDrive? 3. What, if anything, do you think Keri Kalani should do