Icon Film Manufacturers makes film for still and motion picture cameras and other related items. Icon is divided into several divisions, each of which is treated as a profit center. Icon’s upper management rewards the manager of the 35mm film division with an annual bonus equal to a percentage of the net income of the division.
(a) Is net income the best way to evaluate the manager’s performance? Explain your answer.
(b) Should net income be the only method used to evaluate the manager’s performance? If not, list other measures.
(c) Can the manager of a profit center manipulate net income to increase his/her year-end bonus? Explain your answer.
(d) During a conversation with the chief executive officer (CEO) of Icon, you learn that the manager of the 35mm film division is planning to retire in two years. Write a memo to Icon’s CEO explaining the items discussed in parts (a), (b), and (c) and why these evaluation methods and concerns may be more important given the manager’s impending retirement.

  • CreatedMarch 27, 2015
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