Cherrylawn Appliance Stores is a nationwide chain of kitchen appliance stores. The company operates with a widely based retail and distribution system that has led to a highly decentralized management structure. Each area manager is responsible for purchasing and distributing products $($from an approved corporate list$)$ in one of eight geographical areas of the country.

Area managers are evaluated using a performance measure that is calculated as the area$$s contribution to corporate profits before taxes less a $12$ percent investment charge on the area$$s investment base. The investment base of each area is the sum of its year$-$end balances of accounts receivable, inventories, and other assets. Corporate policies dictate that areas minimize their investments in receivables and inventories. Investments in other assets are decisions jointly made by the area and corporate managers based on proposals made by area managers, available corporate funds, and general corporate policy.

The Southeast Area Manager $($SAM$)$ prepared the year $1$ and preliminary year $2$ budgets for the area late in year $0.$ Final approval of the year $2$ budget took place in late year $1$ after adjustments for trends and other information developed during year $1.$ Preliminary work on the year $3$ budget also took place at that time. In early November of year $2,$ the area manager asked the area controller to prepare a report that presents performance for the first nine months of year $2.$ The report follows:

Evaluate the performance of the Southeast Area Manager $($SAM$)$ for the nine months ending September $30,$ year $2.$ Support your evaluation with pertinent facts from the problem.

Identify the features of Cherrylawn$$s division performance measurement reporting and evaluation system that need to be revised if it is to effectively reflect the responsibilities of the area managers.Cherrylawn Appliance Stores is a nationwide chain of kitchen appliance stores. The company operates with a widely based retail and distribution system that has led to a highly decentralized management structure. Each area manager is responsible for purchasing and distributing products $($from an approved corporate list$)$ in one of eight geographical areas of the country.

Area managers are evaluated using a performance measure that is calculated as the area$$s contribution to corporate profits before taxes less a $12$ percent investment charge on the area$$s investment base. The investment base of each area is the sum of its year$-$end balances of accounts receivable, inventories, and other assets. Corporate policies dictate that areas minimize their investments in receivables and inventories. Investments in other assets are decisions jointly made by the area and corporate managers based on proposals made by area managers, available corporate funds, and general corporate policy.

The Southeast Area Manager $($SAM$)$ prepared the year $1$ and preliminary year $2$ budgets for the area late in year $0.$ Final approval of the year $2$ budget took place in late year $1$ after adjustments for trends and other information developed during year $1.$ Preliminary work on the year $3$ budget also took place at that time. In early November of year $2,$ the area manager asked the area controller to prepare a report that presents performance for the first nine months of year $2.$ The report follows:

Evaluate the performance of the Southeast Area Manager $($SAM$)$ for the nine months ending September $30,$ year $2.$ Support your evaluation with pertinent facts from the problem.

Identify the features of Cherrylawn$$s division performance measurement reporting and evaluation system that need to be revised if it is to effectively reflect the responsibilities of the area managers.