1- Mark Ting desperately wants his proposed new product, DNA-diamond, tobe accepted by top management. DNA-diamond is a piece of jewelry thatcontains the DNA of a boy or girlfriend, spouse, or other loved one. Top management will not approve this product in view of its high break-evenpoint.
Mark knows that if he can reduce the fixed costs in his proposal, then thebreak-even point will be reduced to a level that top management findsacceptable. Working with a friend in the company’s finance department,Mark finds ways to credibly misstate the estimated fixed costs of producingDNA-diamonds below those that any objective person would estimate.
Mark knows that if the product is successful (and he is certain that it willbe), then top management will not find out about the understatement offixed costs. Mark believes that this product, once it is successful, willbenefit the shareholders and employees of the company.
Is Mark’s action ethical? Explain? CVP analysis of break-even point computed is needed for a relevant answer.
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