_ Bill C., the supervisor of purchasing operations, is responsible for buying needed Maer als for the Short Manufacturing Company at the most favorable delivered prices. He is evaluated on the basis of net materials price variances each month. Peggie C., the production supervisor, is responsible for producing the company’s products in the desired quantities, attaining appropriate quality standards, and meeting the production schedules that have been adopted. She is evaluated on the basis of net direct materials quantity variances for all materials used each month as well as direct labor efficiency and overhead budget variances.

During February the company’s sales manager, Toni C., landed two huge orders for one of the company’s products. These two orders were obtained because Toni promised the customers almost immediate delivery; she would not have obtained the orders otherwise. Toni C. is evaluated on the basis of total sales dollars from orders she obtains. In fact, she receives a fixed percentage sales commission based on her sales dollars.

To obtain enough direct materials for the production required, Bill C. placed rush orders with the company’s regular supplier and with several other suppliers at above standard prices. He also made special and costly shipping arrangements in order to have direct materials available in time for production.

Peggie C. used several old machines that had been previously taken out of production because they were inefficient, and she employed several inexperienced machine operators in order to complete production in time to meet the deadlines she was given.

Required: Discuss how Toni C.'s promises of “almost immediate delivery” will affect her own performance evaluation and those of Bill C. and Peggie C. Also discuss the likely effects that her promises will have on company profit. Suggest ways to change the performance evaluation system so that it might be more fair to the individuals involved and might improve company profitability as well.

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