Airtex Aviation - Cost Control Study Case
Executive Summary
Two managers recently graduated purchase Air Tex Aviation, a firm on the verge of bankruptcy. In front of the discrepancies of the current control system, Ted Richards and Frank Edwards decide to implement a system which improves transfer pricing, cost allocation and autonomy. Therefore, this case wonders about the difficulties to implement it and the steps to change the management style. It
What appears to be the problem in Air Tex is linked to business which is linked with the state of mind of the staff: there is a lack of motivation. The company is on the verge of bankruptcy because of Sarah Arthur’s accounting system and accounting statements. We know that it is a problem because of the self-interested behavior of Sarah Arthur in the company since 20 years. She monopolizes the decisions and the power.
The issues of autonomy, cost allocations and transfer pricing are those which have an important impact on Air Tex profitability and its strategic vision. The issue for Ted and Frank, future managers of Air Tex is to establish a growth over the long-term for the firm with a new strategic view. The problem statement can be summarized as follows:
How can Air Tex grow in the first five year-period?
Data analysis
There are a number of issues before Franck and Ted set up the decentralized control system, which will be analyzed now.
First, there were problems for Ted with the accounting department: over importance of the accountant Sarah Arthur, inexistence of accounting system, a non-clear and defined financial statements, retention of information, great power in the same hands and lack of management skills. It provoked a lack of information for the departments and of a motivation because they are not involved in the decision making process. Decisions are taking arbitrarily, without the search of a consensus.
Then, Ted felt a problem linked to the personnel work ambiance, their seriousness and more over their
Two managers recently graduated purchase Air Tex Aviation, a firm on the verge of bankruptcy. In front of the discrepancies of the current control system, Ted Richards and Frank Edwards decide to implement a system which improves transfer pricing, cost allocation and autonomy. Therefore, this case wonders about the difficulties to implement it and the steps to change the management style. It
What appears to be the problem in Air Tex is linked to business which is linked with the state of mind of the staff: there is a lack of motivation. The company is on the verge of bankruptcy because of Sarah Arthur’s accounting system and accounting statements. We know that it is a problem because of the self-interested behavior of Sarah Arthur in the company since 20 years. She monopolizes the decisions and the power.
The issues of autonomy, cost allocations and transfer pricing are those which have an important impact on Air Tex profitability and its strategic vision. The issue for Ted and Frank, future managers of Air Tex is to establish a growth over the long-term for the firm with a new strategic view. The problem statement can be summarized as follows:
How can Air Tex grow in the first five year-period?
Data analysis
There are a number of issues before Franck and Ted set up the decentralized control system, which will be analyzed now.
First, there were problems for Ted with the accounting department: over importance of the accountant Sarah Arthur, inexistence of accounting system, a non-clear and defined financial statements, retention of information, great power in the same hands and lack of management skills. It provoked a lack of information for the departments and of a motivation because they are not involved in the decision making process. Decisions are taking arbitrarily, without the search of a consensus.
Then, Ted felt a problem linked to the personnel work ambiance, their seriousness and more over their