Vershire free essay sample

The Weakness of Vershire Company is evaluation system is by being a little bit too modest by only utilizing the variances analysis. This kind of analysis mostly only provides the results but has no capability in reporting the causes. 5. On balance, would you re–design the management control structure at Vershire Company ? Explain ! a. First is in the style of their budget preparation. Their sales budget preparation had little flexibility when it was already approved before the start of the year and were already fixed objectives. This kind of system has an advantage of pushing its managers to strive and meet the objective budgets. However, it is a disadvantage when there are unforeseen relevant costs that are inevitable and must be incurred during the year since there is a meticulous process in covering these costs, which also requires an explanation to the bosses why the budgets have not been met. b. The second is how the company treats its Plants/Manufacturing Department as the Profit Centers. This department only accomplishes orders that the Sales Department dictate, manufacturing the quality products at the lowest reasonable cost possible considering the nature of the competitive industry. However, their performance is evaluated through the profits that the department generates via its cost standards and cost reduction targets. The assignment of the department as a cost center may be inconsistent with itsobjectives since the department itself is not the one determining the price and selling the products. c. Third is how the plant managers performance is evaluated. Since the Department of Plant is treated as profit center, the managers promotions and compensations assessments also based on their profir performance.