Reference no: EM133107854

Question - Smith Corporation manufacturers' doors with wood and metal frames. Smith has three departments: Glass, Wood and Metal. The Glass Department makes the door glass and sends it to either the Wood or Metal Department where the glass is framed. The door is then sold.

Upper management sets the production schedules for the three departments and evaluates them on output quantity, cost variances and product quality.

Required - Using academic literature together with any other articles and resources considered appropriate, and your own informed opinions, prepare a presentation that addresses the following:

1. What is a management control system and what is the goal of the system?

2. Outline what is meant by the term 'responsibility accounting' and what difficulties may arise in operating a system of responsibility accounting?

3. How could the difficulties noted in requirement 2 be overcome?

In relation to the scenario above:

4. Are the three departments cost centres, revenue centres or profit centres?

5. Are the three departments centralised or decentralised?

6. Suppose the upper management of Smith Corporation decide to let the three departments set their own production schedules, buy and sell products in external markets, and have Wood and Metal negotiate with Glass for glass panes -

a. Will this change your answer to requirements 4 & 5?

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

Note that it is not expected that equal time should be spent addressing each of these questions.