When a large Omaha Department store moved to a new location, Sherry Winkler was hired as the new shoe department manager. Harold Knox had been the manager at the old location. Her boss is concerned about the poor performance since she became shoe department manager. The new store location is much larger than the old store location - not all of the space is currently needed. The extra space is divided up among the various departments including the shoe department. Utilities and depreciation amounts are allocated based on the number of square feet in each department.
Shoe department Data
New Location Old Location
Sales $200,000 Sales $100,000
Cost of goods sold 40,000 Cost of good sold 25,000
Salaries 16,000 Salaries 12,000
Allocated Utilities & Depreciation 104,000 Allocated Utilities & Depreciation 13,000
Departmental Income 40,000 Departmental Income 50,000
Departmental Profit Margin 20% Departmental Profit Margin 50%
Katherine Tate is the Manager of the entire store. In an Interview with Sherry she states: "You are not doing nearly as good as your predecessor, Harold Knox. He had a 50% margin - you only have a 20% margin. He had $50,000 of income - you only have $40,000. You are not going to have much of a future here if you do not start to perform better."
Sherry Winkler is not the type of manager to back down from a fight. She said to the Store Manager: "Your figures are skewed by unreasonable data. By any reasonable measure, I am far surpassing the performance of my predecessor, Harold Knox. You should be paying me a bonus - you should not be threatening me."