...Executive Summary AirTex Aviation is an aviation company, where located in one of the most rapidly growing communities in San Miguel Airport. The company provides fuel line services, Flight training and Aircraft sales. Unfortunately, due to poor organization structure and management team, the company goes to bankruptcy in early 1989. Two Harvard business students, Ted and Frank are interested in purchasing and helping a failing business that show a lot of potential. Both of them would like to implement decentralization strategy and a new control system for this failing company in order to change the current poor organizational structure. Ted and Frank’s Strategic Objectives and What Made Air Tex a Good Target Ted and Frank had an ambition to do a “turn around” in a failing business with potential and Air Tex seemed to meet their strategic objectives for the following reasons: 1. Affordability-Ted and Frank purchased Air Tex Aviation’s stock of $100,000 including leasing on the building with purchasing option. Later on, they exercise the option less than the market value, and sell and lease back the building. By doing this, they have already increase the working capital of $500,000. 2. Management-The poorly managed organizational structure of Air Tex became attractive to Ted and Frank and they both believed the company was in need of a new structure - decentralization. They had the skills and ability gained from school and workplace to create a new decentralized environment...
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...Case Study: AirTex Aviation Background: AirTex Aviation was a fixed – base operation at San Miguel airport in Texas responsible for servicing the non-airline aviation market. The company was headed by Bill Dickerson and was close to bankruptcy. For the fiscal year of 1989 it made a loss of $500,000 on sales of $10M. Ted Richards and Frank Edwards purchased it on December 28, 1989 for $500,000. They knew each other from Harvard Business School and sought to find a business and turn it around using their expertise. Neither had any experience in the aviation market. The Business: The business that Frank and Ted purchased had several informal departments: 1. Fuel line activity – Headed by Will Leonard and consisting of 12 employees, operations generated revenue through retail fueling, wholesale fueling, fuel handling, rental cars and tie-downs (storage of air craft) 2. Service and Parts – Headed by Carl Green and consisting of 6 mechanics. Quality was high but department was inefficient. 3. Flight Training – Managed by Roy Douglas and consisting of 7 instructor pilots and three dispatchers, operations generated revenue through flight training and the pilot shop which sold flight supplies. 4. Avionics - Had a single employee, Leon Praxis, who repaired radios and electronic navigational equipment. 5. Aircraft Sales – AirTex had been a dealer of Piper Aircraft. AirTex became unable to finance the aircraft, fired the salespeople and closed the department...
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...Gaspard Virgile Lafitte Pierre Vally Kevin AC 503 E MANAGEMENT CONTROL FALL 2008 Take-Home Case Study: AirTex Aviation Table of contents Table of contents......................................................................................................................2 Executive Summary .................................................................................................................3 Issue statement ........................................................................................................................4 Data analysis............................................................................................................................5 Key Decision Criteria................................................................................................................6 New control system implemented ............................................................................................7 Recommendations .................................................................................................................10 Action and implementation plan .............................................................................................11 2 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...
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...KTH Homework assignment ME2028 Behavioral Management Control Andreas Torbiörnsson 09 How could each of the control problems at Leo´s Four-Plex Theater be solved with the use of Cultural control? Cultural control is a type of control that encourages mutual monitoring1 and it builds a lot upon group pressure. The main idea of cultural control is to get the employees to watch over each other and to create a culture that has certain things that you specifically do or don’t do. It aims to set up shared beliefs and norms in that company, rules of behaving that everyone abides by. The case of Leo’s Four-Plex Theater has a number of control problems that I can identify. They are as follows: Discrepancies in the cash counts of the ticket booths. Most likely caused by a lack of motivation that leads to employee theft and neglecting of duties. The employees working in the refreshment stand sometimes do not collect cash from customers or doesn’t register the sale on the cash register. This is also most likely caused by a lack of motivation, it can’t be lack of direction since they know what they should do and neither could it be a personal limitation since they know how to operate the machine and how to collect payment. The problem seems to be that they don’t know why they should collect the cash. Test counts reveal that the number of tickets sold or put into the stub box isn’t equal to the amount of customers entering and leaving the theater. This seemed to be caused by three...
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...AirTex Aviation The purchase Ted Richard and Frank Edwards were best friend and both graduated from Harvard Business School. Because of personal goals, they decided to operate business together. They spent $100,000 to purchase Airtex Aviation that was lower than the market value. Airtex Aviation prior to purchase Airtex was on of eight fixed-base operations at San Miguel Airport that composed of six informal departments. -Fuel line activity: Will Leonard, who had no experience and appropriately diploma, managed Fuel line department. Moreover, the fuel line activity composed of five different operations: Retail Fueling, Wholesale Fueling, Fuel Hauling, Rental Cars and Tie-Downs. -Service and parts: Carl Green, who had appropriately abilities and diploma, managed entirely service activity. -Flight training -Avionics: Avionics was a single-person management department that was managed by Leon Praxis. -Aircraft sales: Aircraft sales department was closed by mismanagement. -Accounting: It was the major problem of Airtex Aviation. Sarah Arthur managed accounting department without any accounting training. Moreover, even though Sarah collected all financial information, she would not let managers know. Reorganization Company There were three most important tasks that company needed to reorganize. (a) Revamping the management of AirTex (b) Installing a control system (c) Wresting Sarah Arthur authority For cash management, Ted tried to limit Sarah’s work...
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...Case 2: ATLANTIC HOME LOAN Marjorie Marques Management Control Systems Mr. Stephen Del Vecchio January 24, 2014 1. The devices (control) used by Al Fiorini before he went back to school were: * To find a person who should execute his work in the company Atlantic Home Loan (AHL). It is a personnel/cultural control in my opinion because Al decided to delegate his work to a person who had the same thoughts that labor matters. For this reason, Al chose Joe Anastasia because Joe was an employee of the AHL with a lot experience in financial matters. Therefore, Al decided to make a verbal agreement of partnership with Joe. However, Al realized just a few days before going to school in Los Angeles, to be chosen by Joe Anastasia for his partnership was a bad idea because Joe had an alcohol problem and it began to influence Joe’s attendance at work. * Al decided to choose an action control when he talked with Joe about this problem, and Al communicated his rules, policies, procedures and codes of conduct. However, this control had no results expected, and then Alex decided to break the verbal agreement of partnership with Joe. Therefore, Al paid money and broke the verbal agreement of partnership with Joe. The devices (control) used by Al Fiorini after he went back to school were: * Al needed to choose another person in place of Joe. Al found a person named Wilbur Washington. I think it is a personnel/cultural control because, again, Al decided to delegate his...
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...School of Business University of Southern California AirTex Aviation Teaching Note Purpose of Case This case was written to illustrate a basic control system choice. Two young and inexperienced MBA graduates purchase a small aviation company that is in financial trouble. If the company will survive, it will do so only with tight management of cash and new accounting and control systems. The company also needs to make better operating decisions. However, the new owners do not know the business well, so they cannot either centralize authority or be very prescriptive to the line managers as to how to run their operations. As a consequence, they design a new control system that makes each operating department a profit center. With coaching of department managers about good business practices, they manage the business on a decentralized fashion and provide the department managers with incentives for generating good results. The case raises a number of issues that managers face in setting up such a decentralized control system. These include issues of autonomy, cost allocations, and transfer pricing. Suggested Assignment Questions 1. Did AirTex need a new control system at the time of the takeover? 2. Evaluate the control system that Frank and Ted implemented. Should anything have been done differently? Case Analysis Does AirTex Need a New Control System? A reasonable way to start the discussion is to ask, “How is AirTex doing?” Exhibit 2 in the case shows the income for the 4...
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...AirTex Aviation 1. Did AirTex need a new control system at the time of the takeover? * “The management system that was in place was one woman who magically kept everything in her head. There was limited and almost incomprehensible formal system.” Sarah Arthur, the company’s accountant, had complete autonomy over the company’s information, and she kept this information private. * AirTex was in need of a more formalized accounting system, since accounting was a central department of the company, and profitability was a key measure to ensure the success of the company at the time of the takeover. * Also, Ted and Frank had plans to dispose of Sarah Arthur, who was acting manager upon their arrival. However, given her central role within the company for 20 years, she possessed a plethora of information, which was undocumented and she retained in her head * AirTex should make an effort to document and provide proper procedure for all major processes. It will ensure that knowledge is not lost with the departure of key personnel. However, Ted and Frank should be cautious about “rubbing people the wrong way”, especially their employees who have worked at the company for 10+ years. These individuals will be the most resistant to change and will perceive Ted and Frank as new and disruptive. * Managers were unaware of their department’s profitability. It was kept very secretive by Sarah Arthur, the accountant. As a result, managers didn’t know how big their...
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...I think AirTex need a new control system at the time of the takeover; AirTex’s old control system was not effective to serve its objectives, and there are some main reasons why its old control system didn’t work. Firstly, lack of direction, to be specific that is AirTex’s employees don’t know what the company want from them and how can them perform to match the desire from company. Secondly, there was no motivational plan mentioned before the company was taken over, as a result, the employees were not necessarily behavior in the company’s best interests. Thirdly, most of AirTex’s managers and employees were either poor educated or untrained, while the department managers except the accounting department manager, lack the necessary and critical information to do a good job. AirTex has a centralized organizational structure and control system before Fed and Frank took over the company; among all 7 existing departments (the aircraft sales department was discontinued because of company’s poor management), the accounting department was central to the company, positional and administrative; Sarah Arthur, manager of the accounting department, manage the company when CEO was absent, which was frequent. She had no formal accounting training while she control almost everything in AirTex, she is the central repository of the company, she made decision without arriving at consensus with othe management, she keep the information one-way within the company, and she kept the company check…...
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...Management control systems rk assignment ME2028 Behavioral Management Control Andreas Torbiörnsson 09 How could each of the control problems at Leo´s Four-Plex Theater be solved with the use of Cultural control? Cultural control is a type of control that encourages mutual monitoring1 and it builds a lot upon group pressure. The main idea of cultural control is to get the employees to watch over each other and to create a culture that has certain things that you specifically do or don’t do. It aims to set up shared beliefs and norms in that company, rules of behaving that everyone abides by. The case of Leo’s Four-Plex Theater has a number of control problems that I can identify. They are as follows: Discrepancies in the cash counts of the ticket booths. Most likely caused by a lack of motivation that leads to employee theft and neglecting of duties. The employees working in the refreshment stand sometimes do not collect cash from customers or doesn’t register the sale on the cash register. This is also most likely caused by a lack of motivation, it can’t be lack of direction since they know what they should do and neither could it be a personal limitation since they know how to operate the machine and how to collect payment. The problem seems to be that they don’t know why they should collect the cash. Test counts reveal that the number of tickets sold or put into the stub box isn’t equal to the amount of customers entering and leaving the theater. This seemed...
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...Homework Assignment for 4D1165 Behavioural Management Control Year 2007 Part I: The Homework Questions This, the first section, of my homework assignment contains the twenty homework questions that have been handed out to us students throughout the course, along with the answers I’ve composed in order of answering these. 1. One of the causes of management control problems is lack of direction. Why does this problem exist? Lack of direction, a fundamental element in many dysfunctional organizations, constitutes one of the primary needs for management control. Employees are likely to perform in an unsatisfactory manner unless expectations and functions are clarified. Flaws in encouragement and surveillance may loosen the strings between employee and employees, resulting in confusion. Confusion, in this context, involves having people do the wrong things; consequentially leading to decreased productivity. Leo’s Four-Plex Theatre, the first case discussed in class, illustrates the severe effects that a lack of direction may cause. As the personnel of the theatre were unaware of procedures, uninformed about regulations and seemingly, not well instructed on how to perform simple tasks, mistakes occurred. Two lines from the case text make this obvious: (1) The cash counts revealed, almost invariably, less cash than the amounts that should have been collected.[1] (2) Tickets of the wrong color or with the wrong dates in the stub boxes. Bill Reilly, the manager of Leo’s Four-Plex...
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...In-class activity 1: Identifying control problems and MCS Source case / paper: Wong’s Pharmacy (textbook p. 20) AND Leo’s Four-Plex Theater (textbook p. 19) In-class activity questions / objectives: Wong’s Pharmacy: 1. What is the main problem facing Wong’s pharmacy? 2. What options are available to Thomas Wong? Leo’s Four-Plex Theater: 3. What are the key controls problems at Leo’s Four-Plex Theater? 4. State the control measures implemented in the theatre and the purpose and limitations of each 5. Are the problems caused primarily by inadequate existing controls and what improvements would you suggest? In-class activity 2: The role of management accounting information in controlling an organisation Source case / paper: Kaplan, R. S., 1984, The Evolution of Management Accounting, The Accounting Review, Vol. LIX, No. 3, pp. 390-418 (SO page 92 to 120). In-class activity questions / objectives: 1. What is the role of accounting information in controlling an organisation? 2. Outline the historical development of the use of management accounting information to control organisations. 3. Why may profit not be a good criterion to “motivate and evaluate short-term performance” in all cases? In-class activity 3: Controls at the Bellagio Casino Resort Source case / paper: Case Study: Controls at the Bellagio Casino Resort (textbook p. 134) In-class activity questions / objectives: Focus on the three key roles at three levels of authority in the...
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...In the case of the complaint filed by the UFCW 1119 v. Airtex Manufacturing Partnership [1991] Alta.L.R.B.R 783., there are few important issues at play and that need expansion. One is the fact that the employer issued a lockout notice to the workers at their plant on December 02, 1993, and all of the issues surrounding what happened next. The case raises a lot of questions and I will try to expand on my answers to those questions. One of the questions asked in this assignment was whether a strike or lockout ends a collective agreement. A strike or lockout cannot legally take place until a collective agreement has expired. While negotiations are taking place, there is a bridging provision that extends the collective agreement for a period of time. So essentially, after a collective agreement expires, it is still in effect as long as both sides are negotiating. A strike or lockout ends that collective agreement bridge. According to the Alberta Labour Relations Board, “the bridging provisions of Section 130 that extended the collective agreement during negotiations terminate.” “Employers may choose to lockout their employees for a short period of time as a way to end the bridging provisions of Section 130 and thereby apply additional pressure on the union to settle the dispute. Although commonly called a “24-hour lockout”, there is no minimum duration required for a lockout and, in Ironworkers 850 v. Western Archrib [1998] Alta.L.R.B.R. 90, the Board ruled the employer had entered...
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...------------------------------------------------- Course OutlineDepartment of Accounting and FinanceSchool of Business and Economics | ACCT 4250-01 Advanced Management Accounting (3,0,0) MWF 1:30-2:20 PM A&E 208 Instructor: Dr. Laura Jean Kreissl Office: IB 2060 Office Hours: please check office door Email: lkreissl@tru.ca Email is strongly recommended over voicemail as it is checked more frequently Phone/Voice Mail: 250-852-7675 Last Updated: November30, 2015 Calendar Description Building on ACCT 3250: Intermediate Management Accounting, students explore the integrative and interdisciplinary role of management accounting and its contribution to the strategic management process and the provision of quantitative and non-quantitative information for planning, control, and decision making. Topics include management control systems; results controls, action, personnel and cultural controls; control system tightness; control system cost; designing and evaluating management control systems; financial responsibility centers including transfer pricing; planning, and budgeting; incentive systems; financial performance measures; the myopia problem; uncontrollable factors; corporate governance; and ethical issues. | Educational Objectives/Outcomes Upon completing this course, students will be able to: 1. Locate the role of Management Control Systems (MCS) in both strategy and operations. 2. Describe results control and its applications. ...
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...Harvard Business School Publishing Case Map for Horngren, Foster & Datar: Cost Accounting: A Managerial Emphasis, 10th Edition (Prentice Hall) This map was prepared by an experienced editor at HBS Publishing, not by a teaching professor. Faculty at Harvard Business School were not involved in analyzing the textbook or selecting the cases and articles. Every case map provides only a partial list of relevant items from HBS Publishing. To explore alternatives, or for more information on the cases listed below, visit: www.hbsp.harvard.edu/educators Case Title Institution, HBSP Product Number, Length, Teaching Note Geographical and Industry Setting, Company Size, Time Frame Abstract, Key Subjects PART ONE: COST ACCOUNTING FUNDAMENTALS Chapter 1: The Accountant’s Role in the Organization Chapter 2: An Introduction to Cost Terms and Purposes Carver HBSP United States, Consulting Co. #199006 consulting, 10,000 7p employees, 1994 Daniel Dobbins Distillery, Inc. HBSP #189065 7p TN #189172 Tennessee, liquor distillery, 1988 The managing partner of a relatively new consulting firm is concerned because training costs at the firm's new training center are higher than expected. Analysis of actual costs compared to those expected is required. In addition, he is considering capitalizing some training costs for later amortization. A management control system for the center is also a priority. A distiller increases whiskey production and income declines because of accounting...
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