Q 3&4 only

CHAPTER TWELVE MANAGING AND REPORTING PERFORMANCE 607 signing a responsibility accounting system Wariner Equipment Company, in Karratha, Western Australia, manufactures heavy construction equipment The company's primary product, a powerful bulldozer, is among the best produced in the Asia-Pacific region. The company operates in a very price-competitive industry, so has little control over the price of its products. It must meet the market price. To do so, the firm has to keep production costs in check by operating as efficiently as possible. Mathew Basler, the company's CEO, believes that to be successful the company must provide a very high quality product and meet its delivery commitments to customers, on time. Warriner Equipment Company is organised as shown below. Warriner Equipment Company Chief executive officer Manufacturing division Divisional manager Sales division Divisional manager 10 Manufacturing plants 5 Sales districts There is currently a disagreement between the company's two divisional managers regarding the responsibility accounting system. The manufacturing divisional manager claims that the 10 plants should be cost centres because the plant managers do not control the sales of the products. He believes that designating the plants as profit centres would result in holding the plant managers responsible for something they can't control The manager of the sales division holds the contrary position. In his view, the plants should be profit centres because the plant managers are in the best position to affect the company's overall profit. Required: e company's new financial controller, you have been asked to make ar ecommendation to Mathew Basler a recommendation and explaining regarding the r esponsibility centre issue. Write a memo to the CEO making easoning behind it. In your memo, address the following points . Assuming that Warriner Equipment Company's overall goal is profitability, what are the company's critical ucceed to meet its success factors? A critical success factor is a factor on which the company needs to s overall goal, which in this case is profitability Which responsibility accounting arrangement is most consistent with achieving the compa ny's critical 2. success factors? What type of responsibility unit is most appropriate for the company's sales districts? receives rush orders from its customers. Which of the two d to making decisions about uppo se that Warriner Equipment often posed types of responsibility accounting arrangement is best suite ur answer acceptin ing or rejecting rush orders? Does this influence you to charn 12.33 ether the plants should be cost centres or profit centres? Explain yo ment accountant's role: manufacturer