Question
The Heavenly Cloud Mattress Company hired Jason as it chief operating officer (COO) on a four-year contract. Below are the operating data for the four
The Heavenly Cloud Mattress Company hired Jason as it chief operating officer (COO) on a four-year contract. Below are the operating data for the four years in which he was COO. At the end of this period, the board of directors fired Jason because it felt the companys performance had deteriorated throughout his four years of management. Jason filed suit against the company claiming he had been wrongfully discharged without cause.
Year1 Year2 Year3 Year4
Sales (in $1,000) $4,500 $5,200 $5,600 $6,000
Cost of Goods Sold 2,000 2,400 2,800 3,400
Gross Profit 2,500 2,800 2,800 2,600
Operating Expenses 2,100 2,500 2,700 2,800
Net income (Loss) $400 $300 $100 ($200)
During the trial, Jasons expert witness argued strongly to the jury that actually income had grown every year under Jasons management, and therefore, he should have been rewarded for his success, not fired. In this case, Jasons expert witness:
A) was right because there was significant company operating growth every year.
B) was confused because net income declined every year Jason was there; only sales revenue increased.
C) was right about the income growth, but failed to mention the growth in expenses during the same time period.
D) is correct, and he is merely selecting the accounting information that is favorable to his client and not mentioning accounting information that is not favorable to his client.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started