Part 2. David works for Woolgarments Company as a production manager. He often participates in the annual budgeting process of the company. David is requested by the Chief Executive Officer Linda to submit his departments budgeted production for the following year. Linda reviews and typically adds 10 percent to the production budget provided by David. The new amount becomes Davids target production level for the following year. David can receive a cash bonus if his department exceeds the projected production level. Required: a. Explain any incentive that David might have to be dishonest with Linda about the production level he thinks the department can achieve. [5 marks]

b. Explain the impact Davids inaccurate production estimates could have on other company departments or employees. [5 marks]

c. Suggest what should be done to prevent a manager from providing inaccurate budgets which can easily achieved. [5 marks]