A long-established , highly centralized company has grown to the extent that its chief executive, despite having a good supporting team. is finding difficulty in keeping up with the many decisions of Importance in the company .

Consideration is therefore being given to re-organizing the company mto profit centres These would be product divisions, headed by a divisional managmg director. who would be responsible for all the division's activities relating to its products.

You are required to explain , in outline:

(a) the types of decision areas that should be transferred to the new divisional managing directors If such a re-organization is to achieve its objectives ;

(b) the types of decision areas that might reasonably be retained at company head office;

(c) the management accounting problems that might be expected to arise in introducing effective profit centre control.