You are a management accountant with the divisional accounting office of a large grocery retailer, Foodco. Your supervisor has asked you to go to the Richville store to resolve an issue the store manager has with the bakery manager about the fairness of the accounting information used with a bonus system.

In order to remain viable and to grow, Foodco introduced sales and profit targets for retail stores. For an "A-type" store like the Richville store, the weekly sales target is $12 per square foot, or for this 20,000-square-foot store, $12.5 million a year. Operating profits are to be 5 percent of target sales, or $625,000 a year.

Typically, store managers delegate responsibility for sales and operating profits to department managers, i.e., produce, dry goods, bakery, and meats. With this system, the store managers and their department managers receive bonuses equal to about one-third of their salaries if the targets are achieved.

Upon arriving at the Richville store, you meet Stella, the store manager, and then Bert, the baker. Bert reiterates his complaint that the bonus system is based on unfair accounting.