Question 5: Planning: Operational Budgets

John is a manager of the sales department of Conad company. The company operates in the retail industry where it buys products from offshore suppliers at a lower price and sells those products in the local market at a higher price. The pandemic has slowed down the movements of goods across countries. Most countries have restricted or stopped international flights and air travel. This has, in turn, shrunk the air freight capacity of most of the airlines. The shipping sector has also been hit as vessels are placed under quarantine for weeks before being allowed into the ports thereby slowing down processes. Shipping containers are stuck at the ports and on transit at state borders. Due to these changed conditions, the company needs to place its orders to the suppliers eight months in advance to meet customer demands on time. The CFO of the company is preparing the master budget for next year and asked john to provide him with information on the estimated sales for next year. The company has a policy that sales managers can receive a bonus equal to 5 percent of the actual sales in excess of budgeted sales.

Required:

(a) Describe the ethical conflict that John is facing when asked to provide estimated sales for next year?

(b) If John behaves unethically, how would his behaviour impact the company and its customers?