Reference no: EM133004755

You are a management accountant with the divisional accounting office of a large grocery retailer Bidco Foods. Your supervisor has asked you to go to the Uchumi store to resolve an issue the store managers has with the bakery manager about the fairness of the accounting information used with the bonus system. In order to remain viable and grow, Bidco introduced sales and profit targets for retail stores. For an "A" type store like Uchumi the weekly sales target is $12 per square foot: for this 20,000 square foot store, $12.5 million a year. Operating profits are to be 5 percent of target sales: $625,000 a year. Typically store managers delegate responsibility for sales and operating profit to department mangers, i.e. produce, dry food, bakery and delicatessen. Within this system, the store managers and their department managers receive bonuses equal to about one-third of their salaries if the two targets are achieved. Upon Arriving at the Uchumi store, you meet Terry, the store manger, and then Mark, the baker. Mark reiterates his complaint that the bonus system is based on unfair accounting

Required

Problem 1: As the management accountant, you are to use the case approach to identify and analyze the issues and make recommendations for their resolution.