Kranworth Chair Corporation
Notes
1 The term cost center also has a cost accounting meaning
that is different from its meaning here in the context of
responsibility center management. Most fi rms are com-
prised of many cost centers set up for cost accounting pur-
poses to collect like-type costs and assign them to
products and services, but these are not responsibility
centers because they focus on cost categorizations rather
than lines of authority over expenses by managers in
charge of organizational entities with accountability for a
cost budget. Firms typically use many more cost centers
for cost accounting purposes than for responsibility
center control purposes.
2 See, for example, “Study Finds Companies Profit When
They Track Product Parts,” Forbes (December 20, 2013),
online at onforb.es/18WTvjT.
3 “Cisco India’s New Marketing Initiatives Ramp Up Lead Gen-
eration,” CRN (January 15, 2015), online at www.crn.com.
4 “RBS Finds Itself Back in Hot Water,” The Wall Street Jour-
nal (November 25, 2013), online at on.wsj.com/1ekyZ04.
5 “Who Says the Music Industry Is Kaput,” Business Week
(May 27, 2010), online at www.businessweek.com.
6 R. Cooper and R. Slagmulder, “Micro Profit Centers,”
Management Accounting, 79, no. 12 (1998), pp. 16–18.
7 For a further discussion of return measures and their
effects, which we also treat in more detail in Chapter 10,
see W. A. Van der Stede, “Discussion of ‘The Role of Per-
formance Measures in the Intertemporal Decisions of
Business Unit Managers,’” Contemporary Accounting
Research, 30, no. 3 (2013), pp. 962–9.
8 Ibid.
9 “Why Energy Management Matters to CIOs,” Forbes
(September 15, 2010), online at www.forbes.com.
10 Transfer pricing also applies to transfers involving cost
centers. Transfers can be made, for example, at actual or
Copyright © 2017. Pearson Education Limited. All rights reserved.
CASE STUDY
Kranworth Chair Corporation
In July 2003, Kevin Wentworth, CEO of Kranworth
Chair Corporation (KCC), was considering a major
reorganization – a divisionalization – of his company’s
organization structure:
Like many entrepreneurs, I have always been
focused on top-line sales growth, and I have con-
stantly been impressing on my managers to drive
Merchant, K., & Van, D. S. W. (2017). Management control systems 4th edition : Performance measurement, evaluation and incentives. Retrieved from http://ebookcentral.proquest.com
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standard cost or at full or variable cost between cost cent-
ers. However, since most transfer pricing problems
involve profit (or investment) centers, for reasons of sim-
plicity, this chapter refers to both the supplying and buy-
ing entities as profit centers.
11 See, for example, Global Transfer Pricing Survey (Ernst &
Young, 2016).
12 Examples are numerous, but for some recent cases, see
“Brussels Opens Tax Probe into Apple, Starbucks and
Fiat,” The Financial Times (June 11, 2014), online at on.
ft.com/1hJ2Ne7.
13 M. Cools and R. Slagmulder, “Tax-Compliant Transfer
Pricing and Responsibility Accounting,” Journal of Man-
agement Accounting Research, 21 (2009), pp. 151–78.
14 See, for example, C. X. Chen, S. Chen, F. Pan, and Y.
Wang, “Determinants and Consequences of Transfer Pric-
ing Autonomy: An Empirical Investigation,” Journal of
Management Accounting Research , 27, no. 2 (2015),
pp. 225–59.
15 Global Transfer Pricing Survey, op. cit.
16 “The Nobel Prize for Economics: The Bigger Picture,” The
Economist (October 12, 2009), online at econ.st/
JwM1wM; “The Man Who Showed Why Firms Exist,” The
Economist (September 7, 2013), online at econ.
st/161DLgM.
17 For a recent academic treatment of dual transfer prices,
see E. Johnson, N. B. Johnson, and T. Pfeiffer, “Dual
Transfer Pricing with Internal and External Trade,”
Review of Accounting Studies, 21, no. 1 (March 2016), pp.
140–64.
18 See, for example, S. Anderson, B. Zhou, R. Ghayad, and
M. Cragg, “The Interaction of Managerial and Tax Trans-
fer Pricing,” Tax Management Transfer Pricing Report, 24,
no. 17 (January 2016).
sales. My belief was that if you do that, everything
else takes care of itself. Up until recently, I think our
approach made sense. We had very little competi-
tion, and our margins were huge.
Now things are changing. We’ve got some major
competitors who are making headway. I think we
needed to take a fresh management approach to
275
 Chapter 7 • Financial Responsibility Centers
find opportunities to do things better. Our new divi-
sionalized organization structure should help us
serve our customers better and maybe force us to
eliminate certain markets or products that are not
producing results.
But I’m not sure it’s working very well. We’re
seeing some finger pointing between the managers
of the newly created divisions and the managers in
charge of corporate departments. There is a lot of
politics involved in defining the roles, responsibili-
ties, … and rights, of each of the responsibility
centers, and it’s not clear to me yet exactly where
to draw the lines.
The company
In the early 1980s, Weston Krantz, an avid outdoors per-
son, developed a new design for a lightweight, portable
chair that could be stored in a bag and carried anywhere.
Convinced that his design had commercial value, in
1987 Weston cofounded Kranworth Chair Corporation
(KCC) with his longtime friend, Kevin Wentworth, who
had an MBA degree and financial expertise. (The corpo-
ration’s name was a contraction of the founders’ names:
Krantz and Wentworth.) KCC was headquartered in
Denver, Colorado, in the foothills of the Rocky Moun-
tains. KCC produced a broad line of high-quality and
fashionable portable, folding chairs, which were branded
as various models of the Fold-it! brand. In its early years,
KCC sold its products exclusively to distributors.
Since its inception, KCC had been organized func-
tionally. In 2003, reporting to the cofounders were vice
Copyright © 2017. Pearson Education Limited. All rights reserved.
presidents in charge of sales, supply chain, and finance
and administration, plus staff managers responsible for
advertising and research and development (Exhibit 1).
Over the years, KCC expanded its product offerings.
In 2003, it offered an extensive line of folding chairs.
The chairs were produced in various sizes and models,
including both adult and child chairs, single chairs and
loveseats, and full- and beach-height chairs. Some
chairs had additional features, such as cup holders,
storage pockets, and trays. The chairs were produced at
several price points, with varying fabrics, designs (e.g.
single vs. double layer), and frame materials. KCC also
offered some related products, such as folding tripod
stools, ottomans, cots, and stadium seats. KCC also pro-
duced custom-designed products. It employed screen-
printing artists and seamstresses who applied custom
logos, graphics, and lettering to the nylon. KCC
products were often seen at corporate trade shows and
276
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tailgate parties at sporting events. The company kept
track of approximately 1,500 stock keeping units
(SKUs) – finished products and various piece parts that
the company sold – although about 85–90% of the sales
stemmed from only about 40 of the SKUs.
Gradually, KCC built sales by investing in more
advertising and by adding other distribution channels.
By 2003, it sold some products directly to major retail
chains (Wal-Mart, K-Mart, Target), as well as other
retailers (e.g. sporting goods stores) of various sizes. It
sold to retailers using the KCC sales force, outside reps,
and distributors. It also sold custom products directly
to corporations and high school or university book-
stores and athletic departments. The retail channels
provided the highest sales volumes, but those sales
were made at lower margins.
In the 1990s, KCC moved its core manufacturing
facilities to Mexico and China to take advantage of lower
labor rates. Only some assembly (“kitting”) and custom-
izing facilities were retained in the Denver location.
In the company’s first decade of existence, KCC had
little competition. Its chair designs were protected by
more than 20 patents. Sales grew rapidly, and average
margins were high, in the range of 40–50%, although
some margins were sacrificed in later years in order to
generate sales from large retail chains.
In 1999, KCC borrowed $30 million because the
founders, particularly Kevin, wanted to take a signifi-
cant amount of cash out of the company. Kevin had
become interested in ranching, and he wanted to buy a
significantly larger ranch. Ranching had become his
passion, and he was spending less and less time at KCC.
(For years Weston had spent only a small portion of his
time at KCC as he traveled and pursued his various avo-
cations.) The debt service on the loan reduced KCC man-
agers’ margin for error. Cash flow was tight, particularly
at the slow time of the year – October to January.
Starting in the late 1990s, some significant competi-
tors, mostly from Asian countries, entered the market
with comparable chair designs. Despite the fact that
most customers perceived KCC as having superior
designs and higher quality, and customer satisfaction
was high, the higher competition and the worldwide
recession of the early 2000s caused sales to flatten and
profits to drop. The company’s management incentive
plan did not pay out in either 2001 or 2002. In 2003,
performance was slightly improved. KCC’s total reve-
nues were projected to be approximately $70 million,
up from $68 million in 2002, and profits were expected
to be slightly positive.

Motivation for divisionalization
In 2002, Kevin began to think about changes that
might stem from a change in organization structure.
He thought that the KCC managers needed to focus
more on the quality, and not just the quantity, of sales.
To illustrate the point, he described an example in
which KCC personnel had aggressively sought business
from Target, the large retail chain. In order to develop
this retail account, KCC designed a special chair model
for Target and offered a special price with a lower
gross margin. While Target did sell some Fold-it!
chairs, they did not sell many. Part of the reason for
the poor sales was that many of Target’s outlets did not
display the Fold-it! chairs effectively. Instead of dis-
playing them in the sporting goods department, they
shelved them wherever they had room. Kevin
explained, “I walked into a Target store in a suburb of
Denver and found that our products were sitting on the
bottom shelf horizontally in the back corner of the
Automotive Department, where nobody could ever see
them!” Because of the “growth at all costs” philosophy,
KCC incurred significant product development and
marketing costs and ended up carrying a large amount
of inventory; so, overall, the Target account, and some
others like it, were very unprofitable. But to develop
more focus on the quality of sales, KCC had to develop
a stronger customer focus, to understand better cus-
tomers’ needs and wants, and to improve customer
service levels.
Kevin also thought that divisionalization, if imple-
mented properly, could help KCC improve its efficiency
and asset utilization. He thought that with an improved
Copyright © 2017. Pearson Education Limited. All rights reserved.
customer focus, it was almost inevitable that the com-
pany could reduce its SKUs, possibly outsource more
functions, and generally learn to serve customer needs
better while tying up less capital.
Divisionalization alternatives
What kind of divisionalization would be best? Kevin
thought first about the relatively conservative approach
of merely making the sales function a profit center. This
approach would involve charging Sales for the full
costs (or, perhaps, full costs plus a markup) of the prod-
ucts they sold. Sales would have to pay for the costs of
customizing products and holding inventory. This
approach would make Sales more aware of the cost
implications of their decisions and, hence, more moti-
vated to generate profitable sales.
Merchant, K., & Van, D. S. W. (2017). Management control systems 4th edition : Performance measurement, evaluation and incentives. Retrieved from http://ebookcentral.proquest.com
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Kranworth Chair Corporation
But Kevin concluded that KCC should probably go
further to create true product divisions. The KCC man-
agers had frequent debates about what products and
sales channels were most profitable, but those debates
were not informed with hard data. A divisionalization
would require some disaggregation of total costs and
would facilitate profitability analyses.
If this was done, however, the KCC managers would
have to consider how self-contained the new operating
entities should be. Kevin wondered, “Should [the prod-
uct divisions] each have their own supply chain man-
agement, sales force, R&D, and human resources
functions, or should those resources be shared?”
The obvious product split in KCC was between Retail
Products and Custom Products. The Retail Division
would focus on the higher volume, standard product
sales to retail outlets. The Custom Products Division
would focus on the smaller-volume custom sales.
In the approach that Kevin was planning to present
to his management team, the two product divisions
were to become profit centers. Each entity would be
dedicated to its focused core business, but their manag-
ers would be free to choose how they did business and
what they incorporated into their business model.
Reporting to each of the division managers would be
managers responsible for sales and marketing, pur-
chasing and inventory control, and finance and
accounting. Supply chain, R&D, human resources, and
advertising would still be centralized, although these
functions would clearly have to work closely with divi-
sion managers.
Kevin hoped that this new structure would allow the
Retail and Custom Products divisions to make some
bold, new decisions. The new company focus would
also be on creating value, rather than merely growing.
For the divisions, creating value could easily mean con-
tracting sales to eliminate unprofitable or marginally
profitable products and customers. The best customers,
for example, were probably those that bought the most
profitable products, placed inventory requirements on
KCC that were reasonable and predictable, had a strong
credit standing and payment history, and were rela-
tively easy to serve. The divisions might also decide
that they should outsource some functions, such as
warehousing, which might allow KCC to provide better
customer service during the busy seasons and to
employ fewer people and assets in the low seasons.
On July 28, 2003, Kevin presented his divisionaliza-
tion ideas to his management team. Figure 1 shows an
excerpt from the presentation he gave.
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 Chapter 7 • Financial Responsibility Centers
Figure 1 Excerpt from presentation given by Kevin
Wentworth
The new product divisions will be lean, mean fighting
machines with a direct purpose and the vision to carry
that purpose out. With our [corporate managers’]
help, they will look at how they do business now and
what they can do better. They will have the
opportunity to dream. If we were to start a new
product-line business, think of the questions that
would have to be answered:
1. How should we staff?
2. How should we source?
3. How should we warehouse?
4. How should we sell?
5. How should we ship?
6. How should we finance?
These are just some of the many questions that a new
company has to address.
We have a certain advantage since we already have
a baseline. But we also carry along a disadvantage.
We have become entrenched in our ways and are the
costliest product in the market. If we forced ourselves
to completely reevaluate the business, could we
significantly reduce costs, provide better customer
service, and yield higher operating profits? That
answer must be “yes” in order to stay in business in
the future. Think of the fabulous business opportunity
in front of us!
Some of the KCC managers were enthusiastic about
the proposed change. Others thought that the ideas
Copyright © 2017. Pearson Education Limited. All rights reserved.
were radical. A few managers were bewildered, as they
had never worked in an organization with a divisional
structure and had trouble visualizing how it would
work. In the ensuing discussion, many questions arose,
such as relating to the specifics as to who would
be responsible for what and how performance would be
measured and rewarded. It was decided that the idea
needed more specifics.
A follow-up meeting was held two weeks later. By
then most of the managers realized that top manage-
ment had already made this decision; the company was
going to be divisionalized. They then became highly
interested in shaping the details of the change. The
focus of the second meeting was on defining division
management responsibilities.
After considerable discussion, there was general
agreement regarding the following general division of
responsibilities:
278
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Responsibilities of top management and corporate
staff:
1. Overall vision and strategy for the company
2. Financing and other high-level financial matters
3. Engineering, design, and R&D
4. Facilities
5. Legal and intellectual property
6. Supply chain and quality
7. Corporate identity (e.g. public relations, some gen-
eral advertising)
8. Human resources
9. Information technology
10. Acquisitions and joint ventures
Responsibilities of division management:
1. Overall vision and strategy for their respective
markets
2. Development and implementation of divisional
annual budgets
3. Staffing
4. Operations, including purchasing of parts and mate-
rials specific to respective markets, receiving, ware-
housing, shipping, and inventory management
5. Controllership and accounting
6. Product-specific advertising and collateral material
7. Information technology support
With this general understanding of the distribu-
tion of responsibilities in the company in place, the
next task was the development of ideas regarding
performance measurement and incentives. This task
was assigned to Robert Chang, VP – Finance and
Administration.
Performance measurement
and incentives
Robert developed a measure that he called controllable
returns, which was defined as operating income (before
tax) divided by controllable assets. To get to operating
income, all the division direct expenses were sub-
tracted from division revenues, as were as many of the
1
If the division (corporate) plan was met, but the corporate (division)
plan was not, division management would still receive the divisional
(corporate) portion of the bonus.

corporate expenses that could be reasonably allocated
to the divisions. The assets deemed controllable by the
divisions included their receivables, inventories, and
an assigned cost of facilities they used.
Robert proposed an incentive plan that provided 22
managers, down to the director level (one level below
division manager), with a cash award based on achieve-
ment of annual targets set for controllable return at the
divisional and corporate levels. For corporate manag-
ers, the bonuses would be based solely on corporate
performance. For managers assigned to a division, the
bonuses would be based 75% on division performance
and 25% on corporate performance.
Robert proposed that the expected payouts be set
initially at relatively modest levels. If the annual per-
formance targets were achieved, Kevin and Weston
would be paid an award of 40% of salary, division
managers would be paid 30%, and managers lower in
the hierarchy would be paid 15–20%. No payouts
would be made if actual performance was below
plan.1 If actual performance exceeded plan, the pay-
outs could be increased by up to 50%, at the discre-
tion of top management and the company’s board of
directors.
Robert explained that he proposed the relatively
modest awards because the costs of this plan would
probably be in excess of $500,000, a significant addi-
tional expense for the company. Maintaining competi-
tive total compensation levels was not an issue because
KCC managers were currently not accustomed to earn-
ing a bonus, since the old sales growth-based incentive
plan had not paid out anything in either 2001 or 2002.
Copyright © 2017. Pearson Education Limited. All rights reserved.
Plus, Robert thought the company needed to get some
experience with setting division-level performance
targets and measuring and evaluating performance in
a new way before ratcheting the performance-depend-
ent rewards upward while probably reducing the pro-
portion of total compensation paid as fixed base
salaries.
These suggestions were discussed in a staff meeting
held on October 13, 2003.2 The major point of dissen-
sion was regarding the proposed assignment of some of
the corporate expenses to the divisions. Some of the
personnel who were slated for assignment to a division
complained that they could not control the terms of
2
Sales personnel were still included in a sales-based commission
plan. At this meeting the idea came up that the sales commissions
should be weighted based on product profitability, but detailed
discussion of this idea was deferred.
Merchant, K., & Van, D. S. W. (2017). Management control systems 4th edition : Performance measurement, evaluation and incentives. Retrieved from http://ebookcentral.proquest.com
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Kranworth Chair Corporation
deals that corporate staff negotiated for them, such as
for insurance. Kevin headed off this discussion by
explaining that these cost assignments would be built
into the performance targets, so they would not affect
the actual vs. targeted return comparison. Further,
division managers would have near complete freedom
of sourcing. If they did not like the services provided to
them by corporate staffs, they were free to purchase
those services from outside the company.
A follow-up meeting was scheduled for October 27,
2003. That meeting was intended to be used primarily
to design the new organization – who would be
assigned to what division and in what role (see
Exhibit 2). It was hoped that the new divisionalized
structure would be completely in place by January 1,
2004, and the first incentives based on controllable
return would be paid based on 2004-performance.
Hopes and concerns for the future
Kevin was convinced that the new divisionalized
organization structure would give KCC its best chance
for future success:
Most of us are now convinced that this is a good
idea. Although it creates a more complex organiza-
tion, it will make most of our managers feel more
empowered. It will also force us to be more focused
on returns, rather than revenues and cost control.
Privately, however, Kevin expressed concern that
this major turning point in the company’s history was
quite risky.
I’m delegating considerable decision-making
power to the division managers. If they make mis-
takes, our business can go down the tubes. The
managers will make out all right; they can go find
another job. But the fortunes of my family and
those of the other major owners would be
devastated.
He had a specific concern about one manager, Joe
Yarmouth, the current VP-Sales who would be
appointed as general manager of the Retail Division.
Joe is in his early 50s, and he has a lot of experi-
ence. But most of the experience is in sales, rather
than marketing and other functions, and all of his
experience before KCC was in big companies –
Clorox, Hershey’s. Culturally he does not have the
small company mindset. He has no experience in
279
 Chapter 7 • Financial Responsibility Centers
understanding costs, cash flows, and returns. I
think he should have been able to set up more
deals that don’t require any working capital invest-
ment, but he just doesn’t think that way.
So Kevin, and indeed most of the KCC managers,
looked to the future with both eager anticipation and
trepidation.
Early experiences
KCC’s early experiences with the divisionalized struc-
ture created more concern. The first major initiative of
Ed Sanchez, the manager of the new Custom Division,
was to propose the procurement of a more sophisti-
cated fabric-cutting machine. This machine would
allow the fabric to be cut more efficiently and lower
both material and labor costs slightly. A discounted
cash flow analysis suggested that this machine was a
worthwhile investment. But, Kevin explained:
In my opinion, this investment does not address the
real issue in the Custom Division. Our real issue is
turnaround time. We have plenty of margin in cus-
tom work, but we need to reduce our turnaround
time to serve our customers better. I think Ed is
turning the wrong dials.
Kevin also knew that in Retail, the newly installed
division manager Joe Yarmouth, who had good con-
tacts in the advertising world through his prior jobs,
was talking with a new advertising agency about the
possibility of a new campaign to advertise retail prod-
ucts more aggressively. Kevin wondered whether this
Copyright © 2017. Pearson Education Limited. All rights reserved.
was in the best interest of the company. He commented:
I’m worried about losing economies of scale from
dealing with different ad agencies and about what
this “go-it-alone” advertising will do to our corpo-
rate identity. And in any case, lack of advertising
was not the problem we faced at Target; it was
product placement!
Joe, in turn, had already been grumbling to Robert
about late deliveries and missed sales as well as prod-
uct returns due to quality problems, which were
caused, in his opinion, by vendor problems that were
under the purview of Carrie Jennings, the corporate
head of Supply Chain and Quality. In the new organiza-
tion structure, Supply Chain was responsible for
obtaining and maintaining an adequate vendor group,
primarily in Asia and Mexico, to secure both high-qual-
ity subassemblies and on-time delivery, while reducing
280
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dependency on any given vendor. The divisions had
responsibility only for placing the day-to-day purchas-
ing orders (POs) with these vendors. Joe complained:
If I keep having delivery and quality issues due to
problems with our overseas vendors, over which I
have no control, I’m sure going to miss my perfor-
mance target for the year. I am the one – not Carrie –
who feels the pain of lower sales and higher costs
due to product returns, because it directly affects
the numerator of my controllable returns measure,
and thus, my bonus that is totally based on it. I have
already lobbied corporate to let me have control
over vendor negotiations. If they won’t do that, they
should at least adjust my targets so that my evalu-
ations aren’t affected by others’ failures. But so far
they don’t seem to want to listen to me.
Robert estimated that the divisions had about 85%
control over their own P&L results. He believed that
was significant enough:
Joe’s arguments have some merit, but no manager
ever controls everything. Our managers need to
work with others in the organization within the con-
straints in which they are placed, to react to a lot of
changing conditions, and to deliver the needed
results. If Joe can’t do this, then we’ll find someone
else who can.
Robert did not think that corporate managers should
make any changes either to the assigned responsibili-
ties or the bonus plan.
Joe had also proposed some other ideas for a leaner
Retail business that could potentially affect the design of
the Supply Chain function. He wanted to enter into
arrangements with large retailers that would provide
favorable pricing in return for commitments to take
delivery of full containers of finished products right at
the port of entry (from either Asia or Mexico). This would
eliminate further kitting in the Denver plant and reduce
inventory significantly. Kevin thought this could be a
good idea, but he was not sure who should take responsi-
bility for working out the details. He was also worried
about the politics involved in redrawing the lines of
responsibility so early into the new divisionalization.
Another issue that had arisen involved the R&D
function. Corporate R&D was responsible for new prod-
uct designs and refinements. Even though most ideas
for new products or product improvements came from
the division managers and their sales people in the
field, division management did not have much control

over which R&D initiatives received priority. Joe
Yarmouth commented:
There is too much filtering by corporate R&D of the
ideas that we feed them. We can’t get anything
done without Ken Simmons’ [R&D manager] bless-
ing, and Ken really takes his orders from Weston
[Krantz]. We ought to have more influence. We
know our markets better than anyone else in the
company, and we are paying for the function. We
[the divisions] each fund 50% of the corporate R&D
budget. I’m about to take a $150,000 hit for corpo-
rate R&D in my 2004 P&L, and what do I get for
that? And why do we [the divisions] each have to
share the burden equally? I’m also annoyed that
Custom is getting a lot more R&D support than I do.
Certainly Retail is much larger than Custom, but
we’re not getting much support from R&D. All
Exhibit 1 Kranworth Chair Corporation: 2003 organization structure
Copyright © 2017. Pearson Education Limited. All rights reserved.
Merchant, K., & Van, D. S. W. (2017). Management control systems 4th edition : Performance measurement, evaluation and incentives. Retrieved from http://ebookcentral.proquest.com
Created from bilibrary on 2019-03-06 07:30:46.
Kranworth Chair Corporation
they’re doing for us are a few tweaks on our stand-
ard products.
Ed Sanchez (Custom), in turn, was complaining that
R&D was much too “reactive” to new product features
already introduced by competitors, despite the fact that
he and his sales people has proposed many ideas for
more radical changes.
Under this pressure from the division managers,
Kevin was considering whether KCC should allow the
divisions to do their own R&D. He knew doing so would
solve the problems the divisions managers were com-
plaining about, but he wasn’t sure which new problems
it might create. Kevin did not like the whining. But he
also did not want to undercut the local initiative that
the new organization promised to bring to KCC. And in
any case, there were pressing issues to attend to on his
new ranch.
281
 Chapter 7 • Financial Responsibility Centers

Exhibit 2 Kranworth Chair Corporation: 2004 organization structure

Copyright © 2017. Pearson Education Limited. All rights reserved.

This case was prepared by Professors Kenneth A. Merchant, Wim A. Van der Stede, and research assistant Clara (Xiaoling)
Chen.
Copyright © by Kenneth A. Merchant and Wim A. Van der Stede.

282
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