HW3—Airtex Aviation, Inland Steel Company
Case 1: Airtex Aviation, Text p. 246
Discuss two elements of the control system that Frank and Ted implemented. In your opinion were these appropriate and if so what will they help achieve? After they purchased the business of Airtex Aviation, Frank and Ted implemented a control system across the whole company. I would like to discuss both action controls and personnel controls in the system. Action controls include: 1) Profit centers were merged into departments; 2) Profit centers identified revenues and expenses, which were communicated to the profit center manager; 3) Departmental managers were accounted for their profit centers, and would receive a bonus for their performance; 4) The profit center managers have their own authority. For example, they could price their products or services, they could also do what is best for their departmental interests, they could buy needed capital equipment and operating supplies within established purchase order limits, and they also had the authority to hire, fire, and administer the salary schedule independently; 5) Giving the departmental heads the granting authority and the responsibility for collections to motivate them to manager their accounts receivable; 6) Establishing an Administration Profit Center in order to make the managers effectively control their costs. Personnel controls include: 1) Ted called up and dealt with suppliers by himself instead of letting Sarah Arthur manage this issue since she was not capable of doing the company’s best interests. He also established a better relationship with the bank by himself since no one in the company would get this job done; 2) Conducting a Daily Department Report to help improve departmental managers’ management skills; 3) Frank rehired the old salesmen and led them to finish the first aircraft sales; 4) Two departments, Fuel Department and Flight School, have significant accounts receivable. Ted...
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