multiple tasks and delayed evaluation The manager of a facility that manufactures autornobile components is evaluated on the basis of output (relative to an output budget) and cost (relative to a cost budget). Product quality is also important, and it is weU recognized short-run performance measures can be favorably influenced by degrading quality. In tum, quality is monitored by inspection, scrap, and rework statistics. Warranty elaims that are filed by customers are also important, though they can arise up to four years after the component was manufactured. The organization tracks warranty elaims by component, facility and manager at the time of manufacture. Thus, if the manager is promoted, the warranty statistics will continue to be compiled, thereby stretching out the evaluation period. Comment on this evaluation practice.

Finaneial reporting requires the firm provide an accrual to estimate the warranty expense and liability at the time of sale. Why does the firm not find this accroal sufficient for the evaluation exercise?

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