1.

Answer: In the manufacturing plant the production manager is not happy with the engines that
the purchasing manager has been purchasing. In May the production manager stops requesting
engines from the supply warehouse, and starts purchasing them directly from a different engine
manufacturer. Actual materials costs in May are higher than budgeted.
Responsibility: production manager He purchased by his own will. He should ask purchasing
manager. It costs extra cost, which increases the cost.
Controllability: purchasing manager: Production manager should ask purchasing manager, and
require to ask for other alternative suppliers. Production manager should talked with purchasing
manager regarding the quality.
2. Answer: Overhead costs in the manufacturing plant for June are much higher than budgeted.
Investigation reveals a utility rate hike in effect that was not figured into the budget.
Responsibility: production manager: Production manager should have responsibility for
increasing cost, while utility is not
Controllable by production manager. Reduce the cost by turning machine off, turning water off.
Controllability: External force Three month notice to inform the Company about increase of the
price.
3. Answer: Petrol costs for each van are budgeted based on the service area of the van and the
amount of driving expected for the month. The driver of van 3 routinely has monthly petrol costs
exceeding the budget for van 3. After investigating, the service manager finds that the driver has
been driving the van for personal use.
Responsibility: Should only use for working
Controllability: service manager Tell divers do not use the van for personal use Install GPS for
each van Keep the record (logbook) Managers check it randomly Return the vehicle to company.
4. Answer: At Big store Warehouse, one of Anderson’s forklift service customers, Anderson’s
service people are only called in for emergencies and not for routine maintenance. Thus the
materials and labor costs for these service calls exceeds the monthly budgeted costs for a
contract customer.
Responsibility: customer centric
Controllability: Anderson Forklifts
Visit customer every two months: Anderson can visit his customers to check the forklifts every 2
months, if there are more emergency calls given the service contract
Then responsibility lies with Anderson
Controllability: lies with service dept. needs to make regular contact with customer: includes
routine maintenance, material labor costs do not exceed monthly budgeted.
5. Answer: Anderson’s service technicians are paid an hourly wage, with overtime pay if they
exceed 40 hours per week, excluding driving time. Fred Snert, one of the technicians, frequently
exceeds 40 hours per week. Service customers are happy with Fred’s work, but the service
manager talks to him constantly about working more quickly. Fred’s overtime causes the actual
costs of service to exceed the budget almost every month. Alex and group
Responsibility: Fred as employee basic hour’s salary
Follow the guidance of the employer (internal policy): finish on time with satisfactory quality
Controllability: stronger than Fred: decide to pay and how much over time to pay Policy for over
time Customers are happy with Fred’s work Maintain relationship with client
Manager may have two solutions
1. Set time limit for Fred over time: under the limit, get paid, this may alert Fred to re arrange the
time management
2. Use questionnaire with clients to determine what Fred actually does with client: Cheap
talking: get a warning if continues, really consider Fred for firing
3. Use flexible working time manufacturer and sell service fork lifts, use flexible time 9 am 11
pm
c. Do the 40 hours a week
d. Therefore do not need to pay over time
6. Answer: The cost of petrol has increased by 50% this year, which caused the actual petrol
costs to greatly exceed the budgeted costs for the service vans.
Responsible: service manager: for actual exceed budgeted costs
Make a contract with petrol server: long term pricing
Market pricing and not internal: long term contract with fixed price for supplier petrol
Controllable Manager can use the hedging instrument for petrol price volatility the down jones
oil futures and spot prices, use these to anticipate these price rises