QUESTION TWO Golf Ltd. is a ma
QUESTION TWO Golf Ltd. is a manufacturing entity located inHobart. The company has three main divisions: The Golf ClubDivision, the Golf Balls division, and the Clothing and Shoesdivision. The Golf Club division’ profit has been increasing overthe past 10 years. The division has recently implemented severaladvanced manufacturing techniques. Robotic technology plus scannerstest for defects, and the engineering and design team use computersto draft and test new products.
The following managers work in the Golf Club division:
• Angela, sales manager and head of the Sales office (supervisesall sales representatives)
• Carl, technical specialist and head of the IT office(supervises computer programmers)
• Jenny, management accounting manager and head of theAdministration office (supervise management accountants)
• Garry, production manager and head of the Productiondepartment (supervises all manufacturing employees)
• Rachel, engineer and head of the Research and Developmentoffice (supervises all new product design teams).
The Golf Club division reported the following results from2015’s operations.
Sales revenue $ 1,000,000 Variable costs 300,000 Fixed costs500,000 Total assets 625,000
REQUIRED:
(a) Does Golf Ltd. use a market-based or functionalorganizational structure at the division level? Use the informationprovided in the case to justify your answer. (2.5 Marks) ACCT 1014Final Examination (MEL), Semester 1, 2020 Page4/6 RMITClassification: Trusted
(b) Specify how you would treat each of the following subunitsof the Golf Club division from a responsibility accounting point ofview: Sales office, IT office, Administration office, Productiondepartment and Research and Development office. (2.5 Marks)
(c) Elizabeth – the manager of the Golf Club division – has a$120,000 investment opportunity (a new defect detecting system)with the following characteristics.
Expected savings from defects reduction $200,000 Expectedadditional variable costs $80,000 Expected additional fixed costs$90,000
If the manager of the golf club division earns a bonus only ifthe ROI from this year exceeds the ROI from the prior year, wouldshe pursue the investment opportunity? (Note ROI is calculated asoperating income divided by total assets). Show and labelcalculations to support your answer and discuss your findings interms of goal congruence.
(d) What would happen if the bonus is awarded if the manager’sresidual income from this year exceeds the residual income from thelast year? Consider also that Golf Ltd’s minimum required rate ofreturn is 15%. Show and label calculations to support your answerand discuss your findings in terms of goal congruence.(2.5 + 2.5 + 4 + 4 = 13 marks)
Answer:
a) Yes, Golf Ltd. use market based or functional organizationalstructure at the division level-
(i)due to the reason that functional strategies lay down clearlywhat is to be done at the functional level.
(ii)They provide a sense of direction to the functionalstaff.
(iii)They are aimed at facilitating the implementation ofcorporate strategies and the business strategiesformulation at the busines level.
(iv)They act as basis for controlling activities in thedifferent functional areas of business.
(v)They help bringing harmony and coordination as they areformulated to achieve major strategies .
(vi) Similar situations occurring in different functional areasare handled in a consistent manner by the functional managers.
(vii) Thus, strategies need to be segregated into viablefunctional plans and policies that are compatible with each other.In this way, strategies can be implemented by the functionalmanagers
(viii) Environmental factors relevant to each functional areahave an impact on the choice of functionalstrategies.
| Sales and Marketing | engineering | Accounting | Production | Research and Development |
| Angela | Carl | Jenny | Garry | Rachel |
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