Responsibility and controllability. Consider each of the following independent situations for Tropical Hot Tubs. Tropical manufactures and sells hot tubs. The company also contracts to service both its own and other brands of hot tubs. Tropical has a manufacturing plant, a supply warehouse that supplies both the manufacturing plant and the service technicians (who often need parts to repair hot tubs), and 10 service vans. The service technicians drive to customer sites to service the hot tubs. Tropical owns the vans, pays for the gas, and supplies hot tub parts, but the technicians own their own tools. In the manufacturing plant, the production manager is not happy with the motors that the purchasing manager has been purchasing. In May, the production manager stops requesting motors from the supply warehouse and starts purchasing them directly from a different motor manufacturer. Actual materials costs in May are higher than budgeted. Overhead costs in the manufacturing plant for June are much higher than budgeted. Investigation reveals a utility rate hike in effect that was not figured into the budget. Gasoline costs for each van are budgeted based on the service area of the van and the amount of driving expected for the month. The driver of van 3 routinely has monthly gasoline costs exceeding the budget for van 3. After investigating, the service manager finds that the driver has been driving the van for personal use. Cascades Resort and Spa, one of Tropical’s hot tub service customers, calls the service people only for emergencies and not for routine maintenance. Thus, the materials and labor costs for these service calls exceeds the monthly budgeted costs for a contract customer. Tropical’s service technicians are paid an hourly wage, with overtime pay if they exceed 40 hours per week, excluding driving time. Fred Friendly, one of the technicians, frequently exceeds 40 hours per week. Service customers are happy with Fred’s work, but the service manager talks to him constantly about working more quickly. Fred’s overtime causes the actual costs of service to exceed the budget almost every month. The cost of gasoline has increased by 50% this year, which caused the actual gasoline costs to greatly exceed the budgeted costs for the service vans. For each situation described, determine where (that is, with whom) (a) responsibility and (b) controllability lie. Suggest ways to solve the problem or to improve the situation.

Responsibility and controllability. Consider each of the following independent situations for Tropical Hot Tubs. Tropical manufactures and sells hot tubs. The company also contracts to service both its own and other brands of hot tubs. Tropical has a manufacturing plant, a supply warehouse that supplies both the manufacturing plant and the service technicians (who often need parts to repair hot tubs), and 10 service vans. The service technicians drive to customer sites to service the hot tubs. Tropical owns the vans, pays for the gas, and supplies hot tub parts, but the technicians own their own tools. In the manufacturing plant, the production manager is not happy with the motors that the purchasing manager has been purchasing. In May, the production manager stops requesting motors from the supply warehouse and starts purchasing them directly from a different motor manufacturer. Actual materials costs in May are higher than budgeted. Overhead costs in the manufacturing plant for June are much higher than budgeted. Investigation reveals a utility rate hike in effect that was not figured into the budget. Gasoline costs for each van are budgeted based on the service area of the van and the amount of driving expected for the month. The driver of van 3 routinely has monthly gasoline costs exceeding the budget for van 3. After investigating, the service manager finds that the driver has been driving the van for personal use. Cascades Resort and Spa, one of Tropical’s hot tub service customers, calls the service people only for emergencies and not for routine maintenance. Thus, the materials and labor costs for these service calls exceeds the monthly budgeted costs for a contract customer. Tropical’s service technicians are paid an hourly wage, with overtime pay if they exceed 40 hours per week, excluding driving time. Fred Friendly, one of the technicians, frequently exceeds 40 hours per week. Service customers are happy with Fred’s work, but the service manager talks to him constantly about working more quickly. Fred’s overtime causes the actual costs of service to exceed the budget almost every month. The cost of gasoline has increased by 50% this year, which caused the actual gasoline costs to greatly exceed the budgeted costs for the service vans. For each situation described, determine where (that is, with whom) (a) responsibility and (b) controllability lie. Suggest ways to solve the problem or to improve the situation.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In the manufacturing plant, the production manager is not happy with the motors that the purchasing manager has been purchasing. In May, the production manager stops requesting motors from the supply warehouse and starts purchasing them directly from a different motor manufacturer. Actual materials costs in May are higher than budgeted.
Overhead costs in the manufacturing plant for June are much higher than budgeted. Investigation reveals a utility rate hike in effect that was not figured into the budget.
Gasoline costs for each van are budgeted based on the service area of the van and the amount of driving expected for the month. The driver of van 3 routinely has monthly gasoline costs exceeding the budget for van 3. After investigating, the service manager finds that the driver has been driving the van for personal use.
Cascades Resort and Spa, one of Tropical’s hot tub service customers, calls the service people only for emergencies and not for routine maintenance. Thus, the materials and labor costs for these service calls exceeds the monthly budgeted costs for a contract customer.
Tropical’s service technicians are paid an hourly wage, with overtime pay if they exceed 40 hours per week, excluding driving time. Fred Friendly, one of the technicians, frequently exceeds 40 hours per week. Service customers are happy with Fred’s work, but the service manager talks to him constantly about working more quickly. Fred’s overtime causes the actual costs of service to exceed the budget almost every month.
The cost of gasoline has increased by 50% this year, which caused the actual gasoline costs to greatly exceed the budgeted costs for the service vans. For each situation described, determine where (that is, with whom) (a) responsibility and (b) controllability lie. Suggest ways to solve the problem or to improve the situation.

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