Pittsburgh-Walsh Company, Inc. (PWC), Pittsburgh-Walsh Company, Inc. (PWC), manufactures lighting fixtures and electronic timing devices.

Operating Income (loss)

$ 542

$ (12)

$ 199

$ 729

The controller of the lighting fixtures division, anticipating a similar bonus plan for the coming year, is contemplating deferring some revenue into the next year on the pretext that the sales are not yet final and accruing, in the current year, expenditures that will be applicable to the first quarter of the coming year. The corporation would meet its annual plan, and the division would exceed the 10% incremental bonus plateau in the current year despite the deferred revenues and accrued expenses contemplated.

Required

1.     Did the new CEO make the correct decision in eliminated the Lighting Fixtures Mid-Range product line and approving the increased sales support and advertising expenditures? Why or why not?

2.     Outline the benefits that an organization realizes from profit center reporting, and evaluate profit center reporting on a variable-cost basis versus a full-cost basis.

3.     Why would the management of the electronic timing devices division be unhappy with the current reporting? Should the current performance measurement system be revised?

4.     Explain why the adjustments contemplated by the controller of the lighting fixtures division may or may not be unethical.

5.     Develop a balanced scorecard for PWC, providing three to four critical success factors (CSFs) for the four perspectives (financial, customer, internal process and learning and growth.  Make sure your measures are quantifiable.

6.     Develop a strategy map to show linkage of the CSFs throughout the balanced scorecard.