PIK Manufacturing rewards its plant managers for their abilityto meet budgeted quality cost reductions. The bonus is increased ifthe productivity goal is met or exceeded. The productivity goal iscomputed by multiplying the units produced by the prevailing marketprice and dividing this measure of output by the total cost of theinputs used. Additionally, if the plant as a whole meets thebudgeted targets, the production supervisors and workers receivesalary and wage increases. Jim Smith, the manager of a plant inAlberta, felt obligated to do everything he could to provide thisincrease to his employees. Accordingly, he has decided to take thefollowing actions during the last quarter of the year to meet theplant’s budgeted targets and increase the productivity ratio: a.Decrease inspections of the process and final product by 50 percentand transfer inspectors temporarily to quality training programs.Jim believes this move will increase the inspectors’ awareness ofthe importance of quality; also, decreasing inspection will producesignificantly less downtime and less rework. By increasing theoutput and decreasing the costs of internal failure, the plant canmeet the budgeted reductions for internal failure costs and,simultaneously, increase its productivity measure. Also, by showingan increase in the costs of quality training, the budgeted levelfor prevention costs can be met. b. Delay replacing and repairingdefective products until the beginning of the following year. Whilethis may increase customer dissatisfaction somewhat, Jim believesthat most customers expect some inconvenience. Besides, the policyof promptly dealing with dissatisfied customers could be reinstatedin three months. In the meantime, the action would significantlyreduce the costs of external failure, allowing the plant to meetits budgeted target. Required: a. Evaluate Jim’s ethical behaviour.In this evaluation, consider his concern for his employees. Was hejustified in taking the actions described in the problem? If not,what should he have done?