Management Control Systems
Case 4-1 Vershire Company
The case 4-1 deals with the control system, budgeting process and performance measurement of Vershire Company, a large business in the metal can industry. Vershire experienced a strong pressure as they have to meet the customers` expectations about quality, customer service and prices because otherwise they will take another supplier. This situation leads to a very high demand for efficiency and effectiveness and therefore a good planning and control system. The biggest problem in this process is that each of the different plants in the U.S. are treated as profit centers rather than engineered expense centers.
1. The planning and control system also presents several strength and…show more content… The Plant Manager compiles input from Industrial Engineering Department into the budget. Then the Head Office Controller Staff visits the plant and makes a walkthrough to review the budget with plant manager and any supervisors . In September Plant Managers have to submit the plant budgets to Division Head Office which consolidates the plant budgets to a division budget and submit this to the different Divisional General Managers. They again review the division budget and return the budget to Plant Manager for revisions like additional savings before it goes back to the Divisional General Manager. Finally he approves the budget and submits to the Chief Executive Officer who request modifications if necessary or also approves the budget. In December the CEO will submit the final budget to the Board of Directors which also has to approve.
3. Regarding the responsibility of the plant managers for the profit I have to say that they should only be responsible for the expenses they can control as they are not able to control revenue and also the plant does not generate revenue as the sales department does. Even if the visit of the head office controller gives the plant manager a chance to express his or her concerns about the budget he has a lack of control over the sales side. Therefore it is not appropriate to hold the plant manager responsible for profitability.
