2. The company should consider esta

2. The company should consider establishing profit centers for its business units. The contribution income statement should be used to evaluate Samentech Inc.’s business unit managers. The contribution income statement is the best measure of performance because it distinguishes both:
a) traceable and untraceable costs, and
b) controllable and uncontrollable costs (some costs might be traceable to a unit, but not controllable in the short term, as for example facilities costs).

Many times it can be advantageous to compare the managers’ performance to a budget, where the budget is determined with an explicit consideration of conditions in the industry for that unit. This way managers are not rewarded or penalized for favorable or unfavorable conditions within the market place that are beyond their control.

Also, the company should consider using the balanced scorecard, in order to include in the performance measurement all of the critical success factors that managers should attend to in order to align their performance with the company’s strategic goals.