Albrecht 19.pdf - Marriott School
Albrecht 19.pdf - Marriott School
Albrecht 19.pdf - Marriott School
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76154_23_ch19_p942-1006.qxd 3/1/07 3:35 PM Page 1002<br />
1002 Part 6 Control in a Management Accounting System | EOC<br />
You study the problem and tell me what resources you need to meet this 10-day delivery<br />
goal. I want a report from you as soon as possible.”<br />
1. Assuming that the division already has a standard cost system, what limitations of that<br />
system resulted in two more days of delivery time than its competitors<br />
2. Assuming this company has a standard cost system, what changes is the division manager<br />
likely to make in order to meet the president’s 10-day delivery mandate<br />
AA 19-69<br />
DISCUSSION<br />
What Are My Costs Anyway<br />
You have recently been promoted to be the manager of the camera division of a large corporation.<br />
Your most profitable product is a thin, pocket-sized digital camera. Historically, the<br />
pictures taken by the camera were of a poor quality, but due to large investments in research<br />
and new breakthroughs in technology, the digital pictures are of increasingly higher<br />
quality. You have just received your segment financial statements for the period, which report<br />
the following:<br />
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $81,000,000<br />
Cost of products sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,000,000)<br />
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,000,000<br />
On the basis of this performance you are due to receive a $300,000 bonus. The top executives<br />
of the company are ecstatic about your performance because you have increased<br />
quality, reduced defects, and dramatically increased the productivity of your segment.<br />
Having studied management accounting, however, you know that the manufacturing costs<br />
are not the only ones that add value to your products. In fact, in your heart, you believe that<br />
were it not for the fact that you’ve pushed very hard this last year for more research and development,<br />
aggressive marketing, and good customer service subsequent to sales, your segment<br />
would not be nearly so profitable. Yet, these costs are tracked in other departments<br />
and are not your responsibility.<br />
As a manager who is benefiting from traditional performance evaluation methods, you<br />
wonder whether you should inform management that they are actually giving you a bonus<br />
that is too high. Apparently, you are the only one in your company that is aware that these<br />
other value-adding costs should be included in your performance evaluation. What should<br />
you do Do you let well enough alone, or should you go to management and let them know<br />
that some of your bonus should probably be shared with other departments<br />
AA 19-70<br />
JUDGMENT CALL<br />
You Decide: Which is more conducive to a successful organization: a centralized<br />
or decentralized company<br />
With the improvements in technology and communication, many companies are able to decentralize<br />
their operations and still work effectively. Many segment managers have been<br />
given the responsibility to make decisions and react quickly to problems for their respective<br />
department without consulting upper management. Although the trend has been towards<br />
decentralization for some time, is this the best solution for today’s companies Many people<br />
believe that by decentralizing operations, the overall goals and objectives of the company<br />
are forgotten. What one segment manager does for his or her department may not be in the<br />
best interest of the company as a whole.<br />
AA 19-71<br />
JUDGMENT CALL<br />
You Decide: Can a company make a conscious decision and set the prices of its<br />
products, or does the supply and demand of the market automatically dictate the<br />
price<br />
You were talking to your good friend in the economics department about companies and<br />
their pricing strategies. You mentioned a number of models used in accounting, such as variance<br />
analysis and ROI, and how these accounting models are helping companies accurately<br />
price their products, leading to better financial results. However, your friend disagreed. He<br />
(continued)
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