Applied Managerial Accounting – IP4

The Sparklin Automotive Company (SAC) has been in business since 1930. It began business in the United States supplying spark plugs to automotive manufacturers (OEM, the original equipment market) and the automotive aftermarket.
SAC has introduced a new spark plug manufacturing process in the United States that produces a higher quality spark plug guaranteed to last 100,000 miles. The introduction of this spark plug has been very successful in the United States.

The President of SAC has decided to adopt the Balanced Scorecard. You received an e-mail from him asking about tying compensation with performance measures.

Develop a memo in response to the President’s questions in which you discuss unethical behavior that can result if the wrong performance measures are used to tie performance measures to compensation. How can SAC avoid these behaviors? How should SAC tie performance measures to compensation?

•Explain how the Balanced Scorecard is used to make business decisions.
•Analyze ethical issues related to managerial accounting.