Chapter 12, Problem 3TP

Kanye Achebe just became the operations manager of Weston Transportation. Weston transports large crates for online companies and transports containers overseas.

Kanye would like to evaluate each divisional manager on a basis similar to segmental reporting required by generally accepted accounting principles (GAAP) financial statements contained in annual reports. These data include a presentation of net sales, operating profit and loss before and after taxes, total identifiable assets, and depreciation for segment reported. Kanye thinks that evaluating business division managers by the same criteria as the total company is appropriate.

A. Explain why you think the chief financial officer (CFO) disagrees and tells Kanye that publicly reporting information might demotivate managers.

B. For better evaluation of the managers, what type of information should Kanye propose that the CFO might accept?