In this paper, I am required to answer the following questions: 1) evaluate Paul Pecos’ decision rule; 2) evaluate Paul Peco’s reaction to Ms. Goodperson’s sale; 3) Prepare a contribution margin income statement for the month with two columns: in the first column, show the results following Paul’s decision rule. In the second column, show what the results would have been if you chose to revise, the decision rule and your revised decision rule had been followed. For simplicity sake, ignore non-manufacturing cost and taxes. All this information is listed below.
1. Mr. Pecos’ decision was one that the manager should have abided by; I think his decision rule was correct. When standards are set within an organization, they must be followed even if you do not agree. If a manager shows, any lack of keeping the standard this may make the employees feel they can make their own decisions and get away with it. He had to show the other employees that this is the decision he made and it must be followed unless he changes something. Overall, he was able to meet and slightly exceed his goal. So with that being said, his decision to not follow through with the order did not set him back any. I do agree that it was an advantageous offer and with the amount, that the company wanted to order it would have benefited Peco. Therefore, next year maybe he can make a new decision rule, which could state it a company orders over a certain number the price will be slightly lower. This could motivate companies to make larger orders, thus allowing for larger annual sales. All in all the company will make a profit with his rule set but it will not obtain maximum sales that it has potential to yield to ...