You have recently been promoted to be the manager of the Camera Division of a large corporation. Your most profitable product is a thin, pocket-sized digital camera. Historically, the pictures taken by the camera were of a poor quality, but due to large investments in research and new breakthroughs in technology, the digital pictures are of increasingly higher quality. You have just received your segment financial statements for the period, which report the following:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 81,000,000
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,000,000)
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,000,000
On the basis of this performance, you are due to receive a $100,000 bonus. The top executives of the company are ecstatic about your performance because you have increased quality, reduced defects, and dramatically increased the productivity of your segment. Having studied management accounting, however, you know that the manufacturing costs are not the only ones that add value to your products. In fact, in your heart, you believe that were it not for the fact that you’ve pushed very hard this last year for more research and development, aggressive marketing, and good customer service subsequent to sales, your segment would not be nearly so profitable. Yet these costs are tracked in other departments and are not your responsibility.
As a manager who is benefiting from traditional performance evaluation methods, you wonder whether you should inform management that they are actually giving you a bonus that is too high. Apparently, you are the only one in your company that is aware that these other value-adding costs should be included in your performance evaluation. What should you do?