Jack Merritt is the controller for Universal Concrete Products (UCP), a manufacturing company with headquarters in Columbus,

Question:

Jack Merritt is the controller for Universal Concrete Products (UCP), a manufacturing company with headquarters in Columbus, Ohio. UCP has seven concrete product plants located throughout the Midwest region of the United States. The company has recently switched to a decentralized organizational structure. In the past, the company did not try to measure profitability at each plant. Rather, all revenues and expenses were consolidated to produce just one income statement. Under the new organizational structure, each concrete manufacturing plant is headed by a general manager, who has responsibility for operating the plant like a separate company. Jack has asked one of his accountants, Scott McDermott, to organize a small group to be in charge of performance analysis. This group is to prepare monthly reports on performance for each of the seven plants. These reports consist of budgeted and actual income statements. Written explanations and appraisals are to accompany variances. Each member of Scott’s group has been assigned to one specific plant and is encouraged to interact with management and staff in that plant in order to become familiar with operations. After a few months, the controller began receiving complaints from the general managers at several of the plants. Common to many of these complaints is the observation that Scott’s staff members are interfering with operations and, in general, are ‘‘getting in the way.’’ In addition, the managers worry that someone is constantly ‘‘looking over their shoulders’’ to see if they are operating in line with budget. Two plant managers have pointed out that the work the performance analysis staff is trying to do should be done by them (i.e., explain the variances). As Andrew Boord, one of the most vocal plant managers, stated, ‘‘how can these accountants explain the variances when they don’t know anything about the industry? They don’t know what’s happening with our suppliers or our labor unions, and they haven’t got a clue about our relationships with our customers.’’
The president of Universal Concrete Products, Hector Eschenbrenner, has also complained about the new system for performance evaluation reporting. He claims that he is unable to wade through the seven detailed income statements, variances, and narrative explanations of all variances each month. As he put it, ‘‘I don’t have time for this and I think much of the information I am receiving is irrelevant!’’

Requirements
1. Do you think it is a good idea to have a special staff in charge of performance evaluation and analysis?
2. In a decentralized organization such as this one, what would seem to be the best approach to performance evaluation?
3. What information would you include in a performance evaluation report for Mr. Eschenbrenner?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Core Concepts Of Accounting Information Systems

ISBN: 9780470507025

11th Edition

Authors: Nancy A. Bagranoff, Mark G. Simkin, Carolyn Strand Norman

Question Posted: