Vershire Company

Problem: What measures should the different units be held responsible for? How should they then be
evaluated?

Case Context:

Aluminum can industry-cash cow-cost leadership

Divisional, decentralized

Budgetary Control System:

SALES

(see Cza’s) Negotiations

last approval: district manager

Analysis:

Strengths

Many counter-checking; different POVs are put into account

Weaknesses

 Timing- is it correct that it starts at May should start later to estimate demand better
 No controller part in the Sales part  Controller should set parameters and assumptions
(preliminary report, research staff)
 Redundant- research & marketing is the same; can’t they collaborate?  More active role of
Marketing VP (not just review)
 Fixed- assumptions might change  more flexibility
 This might lead to too ambitious forecasts – Competition  cost-center

MANUFACTURING

Strengths

Weaknesses

 Fixed  make flexible

 Sales manager was primarily responsible to get products; customer was primary concern
 Plant mgrs. assigned to actual sales becoming profit center instead of cost center
Recommendation:

Controller Role:

 Align compensation/measure that they are evaluated in with responsibility that they have. Align
their responsibility with what they could control.
 Controller should set parameters and assumptions; should review the reports.

Sales (Also see Weaknesses)

Budget recommendations should start from district manager going up (not up and down etc); with
controller setting parameters

Should be a revenue center

Had sole responsibility for:

Price, Sales mix, Delivery schedule  Controller should be consulted, given controller also has info from
plants.

Manufacturing (Also see Weaknesses)

Cost Center: Variances

It is not directly under their control

Exec Sum

1 Prob, Case context-chai

2 Analysis -Mel
34 Reco/Operationalize (2)- Sales & Manufacturing: Larry n Janell
5 D&J-Cza
Sunday 12nn