VERSHIRE COMPANY

MCS Assignment 3
Group A1
Hemang Chauhan (P40015)
Narendra S. P. (P40086)
Veena Priya Lakshmi V (P40106)

Date – 26 November 2020

Brief about the Case: Vershire Company is a diversified packaging company. One
of its many division is their Aluminium Can division, which is one of the largest
manufacturers of aluminium beverage cans in the United States. Each plant in this divisions
specifically to its own geographics customers, and if they failed to meet the customer’s cost
and quality specifications for delivery and customer service, the customer switches to another
supplier. Therefore, it is important for Vershire to keep control over their plants, budgets, and
performance in terms of efficiency and effectiveness.

Central Point of the Case: The case talks about Vershire’s Biggest division, the
aluminium cans, giving a brief about the evolution of aluminium cans over steel cans. The
case focuses majorly about the Budgetary control System, being pivotal to the organization,
comprises of the sales budget, manufacturing budget, performance measurement and
evaluation and also the management incentives though which Vershire ensures that all the
divisions are in line with the corporate goals and objectives and are evaluated accordingly.

Control Systems Discussed in the Case:

1. Budgetary Control System (BCS) – The Budgets were the primary tools used in
aligning various business divisions of Vershire to a common corporate objective.
a. Sales Budget – It is a tool as a part of the BCS. The Sales budget is prepared
carefully by combination of top down and bottom up approach.
b. Manufacturing Budget – The Sales budget is proportionally allocated to each
manufacturing plant. The budgeted profit numbers were calculated by each plant
based on the fixed and variable costs.
2. Performance Measurement and Evaluation – All the plants prepared a Budget Vs
Actual (Variance) report every month to identify the gap areas and the plant managers
were responsible to provide explanations for the deviations. Hence, the performance
measurement and evaluation is a control system and the Variance Analysis is the tool.
3. Management Incentives – The promotion and compensation were tied to the plant
manager’s ability in meeting the profit budget. Hence, the incentives act as a control
system and the comparative efficiency charts showing manufacturing efficiency by
plant and division acts as the tool.

Learning from the case: Involvement of district sales manager to finalise budget
while sales forecast assumptions were drawn at the corporate head office, this budgeting
system is not much flexible, but pushes managers to meet the objectives. Plant production
activities are influenced by the sales department, which in turn reflects the customer
sentiments. Linkage of the promotions and compensations of the employees’ based on the
profit performance of the plant, which may lead to the trade-off scenario between quality and
cost, and might also affect the objectives of the plant. Timely communication between
managers of various levels as there are less tiers in the organisation structure.