Decentralization, responsibility centres. Corporate Express manufactures and sells stationery products. Corporate Express’s sales and marketing divisions are organized by customer type—government, large corporations, SMEs, NP@Qs and others. The manufacturing éyatiian Tee nats o division produces stationery products for all the divisions. During the planning process, each sales and marketing division specifies the quantity of each product to be manufactured. Senior management then assigns the task of manufacturing the products to different plants in the manufacturing division. Because manufacturing capacity is limited, some production is also outsourced. Senior management determines the manufacturing schedule on the basis of detailed studies that have been done to measure the time and cost of manufacturing different types of products. Manufacturing managers are evaluated based on achieving target output within budgeted costs.

REQUIRED 1. Are the manufacturing plants in the Manufacturing Division cost centres or profit centres?

Explain.

2. Corporate Express is considering decentralizing its marketing and manufacturing decisions by letting manufacturing and marketing managers directly negotiate the prices for manufacturing various products.

a. How should Corporate Express evaluate manufacturing plant managers under this proposal?

b. Would you recommend that Corporate Express decentralize its marketing and manufacturing decisions? Explain.

LO1