Question;DQ;1 The Master Budget and Responsibility;Accounting;From Chapter 22, Ethical Issue 22-1. Complete all parts of the case and respond;to at Ethical Issue;22-1;Residence Suites operates a regional hotel chain.;Each hotel is operated by a manager and an assistant manager/controller. Many;of the staff who run the front desk, clean the rooms, and prepare the breakfast;buffet work part-time or have a second job so turnover is high.;Assistant manager/controller Terry Dunn asked the new;bookkeeper to help prepare the hotel's master budget. The master budget is;prepared once a year and is submitted to company headquarters for approval.;Once approved, the master budget is used to evaluate the hotel's performance.;These performance evaluations affect hotel managers? bonuses and they also;affect company decisions on which hotels deserve extra funds for capital;improvements.;When the budget was almost complete, Dunn asked the;bookkeeper to increase amounts budgeted for labor and supplies by 15%. When;asked why, Dunn responded that hotel manager Clay Murry told her to do this;when she began working at the hotel. Murry explained that this budgetary;cushion gave him flexibility in running the hotel. For example, because company;headquarters tightly controls capital improvement funds, Murry can use the;extra money budgeted for labor and supplies to replace broken televisions or;pay ?bonuses? to keep valued employees. Dunn initially accepted this explanation;because she had observed similar behavior at the hotel where she worked;previously.;Requirements;Put yourself in Dunn's position. In deciding how to deal;with the situation, answer the following questions;1. What is the ethical issue?;2. What are my options?;3. What are the possible consequences?;4. What should I do?;DQ 2 Flexible Budgets and Standard Costs;What are the benefits of standard costs?;How do businesses set those;standards?
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