Q1 Amcor Ltd is a decentralised organisation. Discuss how Sue would create responsibility centres and outline the role of self-managed work teams in implementing performance reports?
Since there are 60 manufacturing operations in 13 countries, each operation may be a responsibility centre with its managers being held accountable for its activities and performance because managers in each region have accurate and complete local information about their particular markets and operations and hence, can manage their units effectively.
There are 4 types of responsibility centres, namely:
· investment centre: the manager is accountable for the profit generated and invested capital to generate profit in that unit.
· Profit centre: the manager is held accountable for the profit of the unit
· Revenue centre: the manager is responsible for the revenue generated by that unit
· Cost centre: the manager is responsible for the costs incurred in the unit
Deciding which type of responsibility centre each region's operation will be depend on the goal of the organisation: whether it wants to maximise return on investment, profit, revenue or minimise cost. In practice, cost centres are commonly used.
Self-managed work teams are established to take wide responsibilities to manage all aspects of a particular process. Since we are talking about a production division, there should be teams responsible for production planning, ordering materials, managing suppliers and customers, managing cost budget,...Self-managed work teams will improved goal congruence, customer service, response time, enthusiasm and job satisfaction. As self-managed work teams are responsible for the performance of their areas, when preparing performance reports and variance, any problems identified will be the responsibility of the teams and they have to fix those problems.
Q2 If Amcor Decides to market the rigid plastic products in Australia (they are currently produced overseas) explain the types of transfer pricing available and list the factors Sue would take into consideration?
There are 3 types of transfer-pricing:
· Market-based price where transfer prices are based on external market prices. This method is often used when there is a liquid market and reliable market price for the tranferred products
· Cost-plus price: tranfer prices are based on cost. COst-plus price is used when there is no reliable market prices or there is a reliable market price but the supplying unit has spare capacity.
· Negotiated price: Managers of supplying and buying units come together to negotiate a price acceptable to both units. Market price will be a starting point and incremental cost of producing and supplying a unit will form a minium limit.
Factors that Sue would take into consideration is whether there is a reliable market price, whether the supplying unit has spare capacity, the impact of difference in international tax rates on transfer price.
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