Riemers Jewelry operates 45 stores in major shopping malls around the country, and Walter Chan is the
Question:
Riemers Jewelry operates 45 stores in major shopping malls around the country, and Walter Chan is the manager of a store in Dallas. The company is in the third quarter of 2020 and is beginning preparation of its fiscal 2021 budget. Typically, the company begins its profit-planning process by asking store managers to forecast sales and expenses. Individual profit plans are developed for each store and aggregated to develop a profit plan for the company as a whole.
In the control process, company executives compare actual profit performance to the plan on a store-by-store basis. Managers of stores that beat their budgeted profit levels are rewarded with significant bonuses.
Required
Will Walter Chan be motivated to provide unbiased forecasts of revenue and expense for the Dallas store? If not, what will be the direction of the bias for revenue and for expense?
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