Tony Li just heard that the Interior Design Department of Downtown Architecture is being considered for closure. Tony has been with Downtown for 8 years and has managed the department well. He has increased revenues steadily over the years, has raised the quality of design being done by recruiting and retaining some of the most qualified and sought- after interior designers, and has even had several of its designs in the past 2 years featured in national style and interior design magazines.

He knows that every quarter the owners inform him that the Interior Design Department isn't covering its costs, but that doesn't make sense to him. He has streamlined operations by cutting out any wasted efforts and resources and, through conversations with managers at other firms, believes that he has one of the most efficient teams going. He was also told by a few customers that the only reason that they had Downtown Architecture design their building was so that they would have the Downtown Design Department on their project as well.

So Tony decided to be proactive and asked to see the financial statements. He wanted to look them over and see how the numbers were adding up. And he was shocked. It was true. The Design Department had net losses each quarter so far this year. Now Tony doesn't know what to do. He doesn't want to go to the manager of the Architecture Department because he and Lucinda have had a rivalry ever since he started at Downtown. Tony has always suspected that Lucinda was sabotaging his efforts and trying to get him fired, but he never had any concrete proof.

Lucinda, as the manager for the Architecture Department, which is the owner's pride and joy, is responsible for financial decisions for the firm such as the allocations of the costs that are shared between the two divisions (the leased equipment, utilities, insurance, rent, and other general expenses). But those are split 50/50 between the departments, so there can't be anything wrong with that. Now it looks as though he may lose not only his job, but the entire department. Tony asks the controller for a set of financial statements for the entire firm and goes home to look them over. Frustrated, he puts them away and starts looking at job postings.

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