Management Control Systems Portfolio Portfolio requirements
The portfolio is to be completed individually. Answers are to be written in lay language but must indicate a sound conceptual understanding of the key issues.
It is to contain:
Question One (word limit: 600 words)
David Hawthorne decided to purchase an office shredder. He has two choices: Venture and Feather. The shredders sold by Venture and Feather offer the same features (reverse function, high-speed, safety and jam-free technologies). Both are mail-order companies with good reputations. Both shredders sell for the same price. To help him make a decision, David gets more information on the two shredders from the respective company websites. He discovers that the cost of operating and maintaining Venture over a two-year period is estimated to be $500. For Feather, the operating and maintenance cost is $700. The sales information for Venture emphasized the lower operating and maintenance costs. While the website for Feather, however, emphasized the service reputation of the product and the faster delivery time (Feather can be purchased and delivered one week sooner than Venture). Based on all the available information, David has decided to buy Feather.
1. What are the strategic positions of the two companies (Venture and Feather) and how do they differ?
2. Suppose that David’s decision was prompted mostly by the desire to receive the shredder quickly. Informed that it was losing sales because of the longer time to produce and deliver its products, the management of Venture decided to improve delivery performance by improving its internal processes. These improvements decreased the number of defective units and the time required to produce its product. Consequently, delivery time and costs both decreased, and the company was able to lower its prices on Venture shredders.
Explain how these actions translate into strengthening the competitive position of the Venture’s shredder relative to Feather’s shredder. Also discuss the implications for the management accounting information system (hint: what sort of information should be collected and reported?). (5 marks)
Question two (word limit: 400 words)
Modern Travel Company has integrated transport networks in three different regions in a developing country. These three markets have vast regional differences. Because of the increasing competition in the market, Modern Travel Company must create a control system that offers continuity of service across the continuum for a set price in order to remain competitive. Its board of directors set the system’s goal as being a leader in developing and maintaining integrated transport networks that support productivity and community wellbeing.
Management Control Systems Portfolio Requirement
To meet this goal in the three regions, should Modern Travel Company System’s management structure be decentralized or centralized? Provide at least four reasons to support your answer. (5 marks)
Question Three (word limit: 600 words)
a.Identify two undesirable actions (other than padding the budget) that managers might take as a result of an overemphasis on budgets as a performance measure. Explain how the actions you have identified affect the short-term and long term performance. (3 marks)
b.Explain how regular interaction between managers and their subordinates can reduce budgetary slack.(3 marks)
c.One way higher-level managers can prevent their subordinates from padding their budget is to allow some discretion to exceed the budgeted costs when necessary. Identify four situations where it is necessary for top management to allow budget discretion.
(2 marks) Total: 8 marks