12-27. Evaluating Management Control Systems (LO 12-1, 3) Lamont Copy Centers (LCC) operates several stores in the upper midwest. The company is decentralized. At the corporate level, there are two operating managers: chief personnel officer (CPO) and chief operating officer (COO). The CPO's performance is measured by the total labor cost of store personnel (excluding store managers) relative to a target. The CPO is responsible for all hiring decisions, but in general follows the recommendation of the store manager for nonmanagerial employees. The COO's performance is based on store profits relative to targeted profits. The compensation for both the CPO and COO includes a contingent portion, which is equal to 25 percent of their base salary in each quarter they meet or beat their target. Information on performance for the last year follows: . . Performance measures. . Compensation. 1 2 3 CPO Quarter Target Labor Cost Actual Labor Cost Target profit Actual Profit $520,000 $530,000 535,000 532,000 495,000 515,000 525,000 518,000 4 COO Required a. Evaluate the performance of the CPO and the COO based on the performance measures the company uses. b. Assess the management control system used at Lamont Copy Centers and provide recommendations for changes, if any are required. Be sure to discuss Decision authority. $260,000 $252,000 300,000 304,000 250,000 235,000 275,000 280,000

12-27. Evaluating Management Control Systems () 10121, (3) 3) Lamont Copy Centers (LCC) operates several stores in the upper midwest. The company is decentralized. At the corporate level, there are two operating managers: chief personnel officer (CPO) and chief operating officer (COO). The CPO's performance is measured by the total labor cost of store personnel (excluding store managers) relative to a target. The CPO is responsible for all hiring decisions, but in general follows the recommendation of the store manager for nonmanagerial employees. The COO's performance is based on store profits relative to targeted profits. The compensation for both the CPO and COO includes a contingent portion, which is equal to 25 percent of their base salary in each quarter they meet or beat their target. Information on performance for the last year follows: Required a. Evaluate the performance of the CPO and the COO based on the performance measures the company uses. b. Assess the management control system used at Lamont Copy Centers and provide recommendations for changes, if any are required. Be sure to discuss - Decision authority. - Performance measures. - Compensation