P12.32 Designing a responsibility accounting system: Page 572 manufacturer LO 12.4 2 Warriner Equipment Company, in Karratha, Western Australia, manufactures heavy construction equipment. The company's primary product, a powerful bulldozer, is among the best produced in the Asia-Pacific region. The company operates in a very price-competitive industry, so it has little control over the price of its products. It must meet the market price. To do so, the firm has to keep production costs in check by operating as efficiently as possible. Mathew Basler, the company's CEO, believes that to be successful the company must provide a very high quality product and meet its delivery commitments to customers, on time. Warriner Equipment Company is organised as shown below. Warriner Equipment Company Chief executive officer Manufacturing division Sales division Divisional manager Divisional manager 10 Manufacturing plants 5 Sales districtsThere is currently a disagreement between the company's two divisional managers regarding the responsibility accounting system. The manufacturing divisional manager claims that the 10 plants should be cost centres because the plant managers do not control the sales of the products. He believes that designating the plants as profit centres would result in holding the plant managers responsible for something they cannot control. The manager of the sales division holds the contrary position. In his view, the plants should be profit centres because the plant managers are in the best position to affect the company's overall profit.Required As the company's new financial controller, you have been asked to make a recommendation to Mathew Basler regarding the responsibility centre issue. Write a memo to the {ZEDI making a recommendation and explaining the reasoning behind it. In your memo, address the following points. 1. Assuming that Warriner Equipment Company's overall goal is profitability, what are the compa ny's critical success factors? A criticol success foctor is a factor on which the company needs to succeed to meet its overall goal, which in this case is profitability. 2. Which responsibility accounting arrangement is most consistent with achieving the company's critical success factors? 3. What type of responsibility unit is most appropriate for the company's sales districts? 4. Suppose that Warriner Equipment often receives rush orders from its customers. Which of the two proposed types of responsibility accounting arrangement is best suited to making decisions about accepting or rejecting rush orders? Does this influence you to change your recommendation about whether the plants should be cost centres or profit centres? Explain your answer. >Er=|=