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Responsibility and Analysis. In class: Cedar Electronics; Assignment #1 returned next class Next class : Case - Enager Industries. Negotiations. February 16 th , 2010
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Responsibility and Analysis In class: Cedar Electronics; Assignment #1 returned next class Next class: Case - Enager Industries
Negotiations • February 16th, 2010 • The negotiating teams for the StFXAUT and StFX University have reached a tentative collective agreement. The tentative agreement has been approved by the StFXAUT Executive and will be recommended to the Membership. • The agreement is subject to the approval of the StFXAUT membership by means of a ratification vote. A date for a meeting of the Members and the vote will be announced shortly. • A media blackout is in place until the outcome of the ratification vote is known.
Cedar Electronics: Context • Canadian Company • Manufacture of electronic devices • Three decentralized divisions: Electronics, Appliances, R&D • One division not profitable (Appliances) • Divisions independent and expected to sell, supply & sources internally • Cost of capital 10%
Cedar Electronics: Context • Organizational Goals: • increase divisional and company profits • establish a protected market for RX-100 • decentralization • Organizational structure: • decentralization • divisions - operate independently • free to sell externally but expected to sell internally
Cedar Electronics: RX100 • Appliance Division Claims RX100 are a major problem • Applicant division uses every excuse to source RX-100 externally • Capital investment to increase Rx-100 production capacity • Competing products replacing RX-100 • 12% of Electronics Divisions sales are RX-100 to Appliance Division
Cedar Electronics: Issues • 1. RX-100 • Contribution of RX-100 • impact of transfer price to appliance division • assessment of capital purchase to increase RX-100 production • 2. Appliance Division • external purchase of RX-100 • financial impact of closure of sales division • 3. Evaluate Management Control Systems
Cedar Electronics: Evaluation • Responsibility Center • Investment centre classification • Expected to earn a 10% ROI • Sales department treated as a profit centre • Sales department is unable to keep its sales staff • 5% capital investment rule
Cedar Electronics: Evaluation • Performance Evaluation • ROI measure - 10% on investment base • Investment base: book value of CA + NBV of capital assets • Corporate overhead allocated based on % sales • RD&I budget for researching new products not included in ROI calculation
In-Group Calculations • 1. RX100 contribution margin • 2. Application division contribution margin • 3. Sales outlet contribution margin • 4. RX-100 Investment Assessment
Midterm • Worth – 30% • When – in-class next Tuesday (23rd ) • Coverage – Budgeting (15), Standard costing (16), Flexible budgeting (17), Responsibly accounting (18) • Format: short answer, choice of 3 out of 4, mix of qualitative and quantitative in each question