Sound Dynamics, Inc.(Mcs Case)

Topics: Control theory, Human resource management, Salary Pages: 5 (1194 words) Published: December 20, 2010
Management Control System|
Case Study 9-1|
Sound Dynamics, Inc.|
Mohammad Shakhawat Hossain | 4/8/2010|


Introduction and Case History:

Sound Dynamics was a US-based international manufacturer of audio recording equipment, including consumer and commercial lines. Annual sales volume was approximately $1 billion (US) and total employment had passed the 10,000 mark. Sound Dynamics was organized in three sectors, commercial, consumer, and International. The international sector was composed of subsidiaries in 20 countries that distributed Sound Dynamics products throughout the world.

Reichard Produkten, GmbH, located in Munich, was one of the larger subsidiaries in the sector. It produced commercial components and supplies for distribution throughout Western Europe.

San Remo was located in the German-speaking region of Northern Italy, near the Austrian border. The San Remo factory was converted from commercial component manufacturing to consumer components for all of the EC market.

During the last quarter of 1989, the Reiched Produkten and the San Remo consolidated their commercial products manufacturing and related activities. A major reason for the, consolidation of manufacturing activities was to achieve scale economies wherever possible. There had been an anticipated annual saving in Reichard's production control department, for example, of $184,000 from a reduction in the number of salaried personnel by 12 through eliminating duplicate jobs. There also had been an expected saving from computerization of production scheduling and control. Prior to consolidation, the San Remo subsidiary had been using a computerized scheduling and control system, whereas Reichard had been using a manual system. In December 1989, a study was made to determine which system of control would best serve the consolidated commercial manufacturing operation. This study indicated that annual savings of about $138,000 in salary and related expenses, associated with the anticipated elimination of 11 positions, could be realized from computerization. The manufacturing office of Reichard had concurred with the findings of this study, and the decision was made to computerize production control for the consolidated manufacturing operation.

In April 1990, the manufacturing director of the Reichard subsidiary of Sound Dynamics, Inc., submitted a memorandum to the managing director of the subsidiary that asked for a supplemental budget for the production control department and explained why increased personnel and funds were needed. In accordance with the company's standard procedure, the request was passed, to the subsidiary's financial controller, Ms. Martha Larson, for review. Ms. Larson, after studying the matter, decided the supplemental budget was not justified and wrote a memorandum to the manufacturing office explaining her position. The manufacturing office, in the latter part of July, sent a memorandum to Ms. Larson outlining its disagreement with her conclusions and supporting analysis Questions:

1. Try to reconcile the numbers in the various positions reflected in the memos in Appendixes A, B, and C. Prepare a brief summary that reconciles the differences. Of the disputed differences, how many people and how much money is attributable to alleged workload increase? To salary mix change? To unanticipated one-time computerization implementation costs?" 2. Having struggled with Question 1 for a while, what do you think is really going on in the memos? 3. Based on your analysis of the situation, what is a ''reasonable'' budget for the department for 1990? 4. What should Ms. Larson do now?

5. What lessons for effective controllership should we draw from this case?

1. According to the...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Elektra Products Inc. case analysis Essay
  • Mc Donald Case Study Essay
  • Essay about Mc Donald Case
  • Mc Cain Case Study Research Paper
  • Mc Donald Case Analysis Essay
  • Ministry Of Sound Case study Research Paper
  • Case Analysis: Mc Donald's Research Paper

Become a StudyMode Member

Sign Up - It's Free