Break Even point
Paper instructions:
Suppose you are given the following scenario:
Lesley Chomski is the supervisor of the new product division of MCO Corporation. Her annual bonus is based on the success of new products and is computed on the
number of sales that exceed each new product’s projected break-even point. In reviewing the computations supporting her most recent bonus, Chomski found that although
an order for 7,500 units of a new product called R56 had been refused by a customer and returned to the company, the order had been included in the calculations. She
later discovered that the company’s accountant had labeled the return an overhead expense and had charged the entire cost of the returned order to the plant-wide
overhead account. The result was that product R56 appeared to exceed break-even by more than 5,000 units and Chomski’s bonus from this product amounted to over $800.
How do you think Lesley Chomski should respond after the discovery regarding her own bonus? What actions should Chomski take? Discuss how break-even for the
product R56 was calculated and if this was correct or not. Then discuss the ethical dilemmas to the case.
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