Cost Centre Of Sales Branches

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1. Executive Summary 3
1.1 Purpose of Report 3
2. Introduction 4
2.1 Background 4
3. Findings 5
4. Discussion 5
4.1 Thoja Organisational Structure 5
4.2 Benefits of decentralisation 5
4.3 Limitations of decentralisation 5
5. Cost Centre 6
6. Thoja 's Old Budgeting System 7
7. Thoja 's New Budgeting System 8
8. Conclusion and Recommendations 8
10. References 9

1. Executive Summary

1.1 Purpose of Report

The purpose of this report is to distinguish the type of cost centre of sales branches and to also compare the old and new budgeting systems at Thoja.

Thoja Company is a decentralised company in which its organisational structure is functionally based. The company’s sales branches are recognised as discretionary cost centres. The company’s president, Harry Hansen has decided to implement a new budgeting system for the sales branches in order to prevent budget slacks. The reason for implementing the new budgeting system is to attempt to lower selling expenses and sales volume together.

The new budgeted system at Thoja comprises of fixed and variable costs in order to associate selling expenses and sales volumes together. With the implementation of the new budgeting system, the company overcame the partiality and biasing forecasts, however the new system also had some potential disadvantages as tight budgets may encourage managers to cut costs and as a result, this will be damaging the company’s long-term benefits. Furthermore, the sales branches at
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