Decentralization, responsibility centres. Quinn Corporation manufactures and sells lighting products. Quinns sales and marketing divisions are organized
Question:
Decentralization, responsibility centres. Quinn Corporation manufactures and sells lighting products. Quinn’s sales and marketing divisions are organized along product lines—
wall sconces, recessed lights, track lights, and so on. The manufacturing division produces lighting products for all the divisions.
During the planning process, each sales and marketing division specifies the quantity of each style oflights to be manufactured. Senior management then assigns the task ofmanufac¬
turing the lights 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 ofmanufacturing different types oflighting 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. Quinn Corporation 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 Quinn evaluate manufacturing plant managers under this proposal?
b. Would you recommend that Quinn Corporation decentralize its marketing and manufacturing decisions? Explain.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9780131971905
4th Canadian Edition
Authors: Charles T. Horngren, George Foster, Srikant M. Datar, Howard D. Teall