Chapter 6, Problem 6.32E

Responsibility and controllability. Consider each of the following independent situations for Prestige Fountains. Prestige manufactures and sells decorative fountains for commercial properties. The company also contracts to service both its own and other brands of fountains. Prestige has a manufacturing plant a supply warehouse that supplies both the manufacturing plant and the service technicians (who often need parts to repair fountains), and 12 service vans. The service technicians drive to customer sites to service the fountains. Prestige owns the vans, pays for the gas, and supplies fountain parts, but the technicians own their own tools.

1. 1. 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.
2. 2. 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.
3. 3. 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.
4. 4. Regency Mall, one of Prestige’s fountain 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.
5. 5. Prestige’s service technicians are paid an hourly wage of $22, regardless of experience or time with the company. As a result of an analysis performed last month, the service manager determined that service technicians in their first year of employment worked on average 20% more slowly than other employees. Prestige bills customers per service call, not per hour.
6. 6. The cost of health insurance for service technicians has increased by 40% this year, which caused the actual health insurance costs to greatly exceed the budgeted health insurance costs for the service technicians.

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.