Airtex Aviation - Cost Control Study Case

1771 Words Feb 3rd, 2011 8 Pages
Executive Summary

Two managers recently graduated purchase Air Tex Aviation, a firm on the verge of bankruptcy. In front of the discrepancies of the current control system, Ted Richards and Frank Edwards decide to implement a system which improves transfer pricing, cost allocation and autonomy. Therefore, this case wonders about the difficulties to implement it and the steps to change the management style. It

What appears to be the problem in Air Tex is linked to business which is linked with the state of mind of the staff: there is a lack of motivation. The company is on the verge of bankruptcy because of Sarah Arthur’s accounting system and accounting statements. We know that it is a problem because of the self-interested
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Other intention is to work with a cost control system, more efficient than easy to implement, in order to change the current financial situation of the firm.

Corporate Governance

One of the most important decisions is to decentralize management decision. This resolution suggests limiting the power of the accountant. Each divisional manager will be more autonomous and can directly impact their future performances. The decentralization of the decision process is a good way to facilitate it and help to develop relationship between stakeholders and staff.


Each division is an autonomous profit center. Each divisional manager has the possibility to take decisions on labor, supplies and material, product mix and selling price of his department’s product. This decision right is a variable to affect the moral of the managerial team and motivate them. It’s a start for an incentive program.

New control system implemented

With the new control system, the leadership is divided between Ted Richards and Frank
Edwards as equal partners and as best friends and they try to encourage staff to take desirable actions by decentralizing the power and involving the staff.

The objective of the two partners was to look younger the management of Air Tex, to create a new control system provision support and information needed, and to lower the power of the accountant Sarah Arthur.

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