Armco Inc

1329 Words Mar 22nd, 2015 6 Pages
| Management & Control Systems | Learning Group 4 | | [Geef de naam van de auteur op] | 9-2-2014 |

This document contains all the cases made by learning group 4. |

1. What was wrong with the Midwestern Steel Division’s old system? (As part of your analysis, study Exhibit 3 carefully and figure out what the columns tell you, individually and in total.)
Before 1991 the performances of the cost center managers and their superiors in the plant were evaluated in terms of cost control and safety. The key cost performance measure was a summary called ‘Cost above’ which included the cost added per ton of steel at each production stage and for the entire plant.
Cost above and the items that comprised it were reported to
…show more content…
And most of the information shown in the report is more valuable to accountants than to production managers. 2. If the old system was so bad, why did the operating managers seem to like it?
The operating managers had become accustomed to the operating statistics report and in general they liked it. For example one manager said that he looked at 95% of the information presented to him, although he acknowledged that some of the items were quite small in dollar value.
Paul Phillips, felt that operating statistics report was the minimum amount of detail necessary. He would have preferred to have the operating statistics report on a weekly basis and in his hands on Monday morning.
The accounting department also provided other reports showing the detail behind the figures for some of the cost elements on request. For example one report showed the cost for nonmetallic materials broken down by the specific materials used.
The managers liked it because of the high amount of details; therefor they knew exactly where the costs were made in their department. And if they wanted to know more about a specific part of the cost made they could get the numbers on request.

3. Evaluate the new system and the way in which it was being implemented. What changes would you recommend, if any? Why?
In the new system, some things have changed compared to the old one. In the designing phase they defined 10 key performance measures: 1. Heats per week 2. Tons per man

More about Armco Inc