Fenster Corporation manufactures windows with wood and metal frames. Fenster has three departments: glass, wood, and metal. The glass department makes the window glass and sends it to either the wood or metal department where the glass is framed. The window is then sold. Upper management sets the production schedules for the three departments and evaluates them on output quantity, cost variances, and product quality.

Read the requirements.

Requirement $1.$ Are the three departments cost centers, revenue centers, or profit centers?

Glass department

Wood department

Metal department

Requirement $2.$ Are the three departments centralized or decentralized?

Glass department

Wood department

Metal department

Requirement $3.$ Can a centralized department be a profit center? Why or why not?

A centralized department be a profit center. Centralization relates to the that a department has for $.$ This concept is of the type of responsibility center a department is classified as$.$

Requirement $4$a$.$ Suppose the upper management of Fenster Corporation decides to let the three departments set their own production schedules, buy and sell products in the external market, and have the wood and metal departments negotiate with the glass department for the glass panes using a transfer price. Will this change your answers to requirements $1$ and $2?$

With these changes, Fenster will be moving toward a more environment because each department will have local decision$-$making authority. These changes also make all three departments centers because the managers of each department are responsible for

b$.$ How would you recommend upper management evaluate the three departments if this change is made?

I would recommend that upper management evaluate the three departments as centers because would be a good indicator of how well each department is doing.