[SOLVED] Pittsburgh-Walsh Company Inc. (PWC) manufactures

Pittsburgh-Walsh Company Inc. (PWC) manufactures lighting fixtures and electronic timing devices. The lighting fixtures division assembles units for the upscale and mid-range markets. The trend in recent years as the economy has been expanding is for sales in the upscale market to increase while those in the mid-range market have been relatively flat. Over the years, PWC has tried to maintain strong positions in both markets, believing it is best to offer customers a broad range of products to protect the company against a sharp decline in either market. PWC has never been the first to introduce new products but watches its competitors closely and quickly follows their lead with comparable products. PWC is proud of its customer service functions, which have been able to maintain profitable relationships with several large customers over the years. The electronic timing devices division manufactures instrument panels that allow electronic systems to be activated and deactivated at scheduled times for both efficiency and safety purposes. Both divisions operate in the same manufacturing facilities and share production equipment. PWCâ€™s budget for the year ending December 31 follows; it was prepared on a business unit basis under the following guidelines: âˆ™ Variable expenses are directly assigned to the division that incurs them. âˆ™ Traceable fixed overhead expenses are directly assigned to the division that incurs them. âˆ™ Common fixed expenses are allocated to the divisions on the basis of units produced, which bears a close relationship to direct labor. Included in common fixed expenses are costs of the corporate staff, legal expenses, taxes, marketing staff, and advertising. âˆ™ The company plans to manufacture 8,000 upscale fixtures, 22,000 mid-range fixtures, and 20,000 electronic timing devices during the year.

PWC established a bonus plan for division management that provides a bonus for the manager if the division exceeds the planned product line income by 10% or more. Shortly before the year began, Jack Parkow, the CEO, suffered a heart attack and retired. After reviewing the current budget, Joe Kelly, the new CEO, decided to close the lighting fixtures midrange product line by the end of the first quarter and use the available production capacity to grow the remaining two product lines. The marketing staff advised that electronic timing devices could grow by 40% with increased direct sales support. Increasing sales of the electronic timing devices and the upscale lighting fixtures product lines would require expanded advertising expenditures to increase consumer awareness of PWC as an electronics and upscale lighting fixtures company. Joe approved the increased sales support and advertising expenditures to achieve the revised plan. He advised the divisions that for bonus purposes, the original product-line income objectives must be met and that the lighting fixtures division could combine the income objectives for both product lines for bonus purposes. Prior to the close of the fiscal year, the division controllers were given the following preliminary actual information to review and adjust as appropriate. These preliminary year-end data reflect the revised units of production amounting to 12,000 upscale fixtures, 4,000 mid-range fixtures, and 30,000 electronic timing devices.

Because of the better-than-expected performance in the current year, the controller of the lighting fixtures division, anticipating a similar bonus plan for the coming year, is contemplating (1) deferring some revenue into the next year on the pretext that the sales are not yet final and (2) 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? Why or why not? 2. Outline the benefits that an organization realizes from profit center reporting, and evaluate profit center reporting on a variable costing basis versus a full costing 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 by citing specific standards in the Institute of Management Accountantsâ€™s Statement of Ethical Professional Practice (available here: www.imanet.org/-/media/b6fbeeb74d964e6c9fe-654c48456e61f.ashx). 5. Develop a balanced scorecard for PWC, providing three to five perspectives and four to six measures for each perspective. Make sure your measures are quantifiable.

Question: Pittsburgh-Walsh Company Inc. (PWC) manufactures