General Appliances Essay Example for Free

General Appliances EssayIntroductionThe General Appliance Corporation is a manufacturer of all types of denture appliances. The company has a decentralized, course of instructional giving medicational structure, which consists of four product divisions (electric chain, laundry equipment, refrigeration and miscellaneous appliance division), four manufacturing divisions (chrome products, electric motor, gear and transmission and stamping division) and sextuplet staff offices (finance, engineering, manufacturing, industrial relations, buy and marketing staff). The staff offices do not have functional authority over the divisional general managers, who are each responsible for their own divisional forcefulness. The manufacturing division made approximately 75 percent of their sales to the product division. In addition, the parts made by the manufacturing division is designed and engineered by the product divisions. Since the eight divisions are expected to act like independent companies, the transfer equipment casualtys are negotiated amongst themselves. But, if two divisions could not agree on a price, they submit the dispute to the finance staff for arbitration. The product division does not have the power to decide whether to buy from within the company or from outside. If there was a dis reason with the sourcing, the manufacturing division could appeal to the purchasing staff to reverse the decision.ProblemAt the General Appliance Corporation, the purchasing staffs are the personnel that decide which part would continue to be construct within the company (org. chart may need to be revised). When the part is decided to be manufactured internally, the manufacturing division must hold the price at a level the product (purchaser) division could purchase it outside. Currently, the managers do not have the freedom to author and choose the alternative that is in their best interest, rase though an alternative for sourcing does exist.The three problems t hat exist in the company are-Determining a transfer price that includes the extra $0.80 per unit spent on developing the new quality standards. Also, the arbitration committee should determine whether the appearance is a subjective or neutral matter.-An excess capacity (supply is greater than look at) caused a temporarydecrease in the selling price.-The standard price used for calculations of the total equal, profit and proposed price is headstrong from the price given in a competitors proposal this is not a definite price.Investment Centres dont know when to produce or when to outsource (what role does initiation or engineering for lower costs play?)For each case, calculate if its better to outsource or manufactureArbitration committee which considers all staff functionsDo something quick turbulent (cheap) and easy to doAnalysisStove Top Problem Survey has shown that the companys reputation as a producer of quality products has deteriorated, and resulted in the Chrome Pro ducts Division implementing quality improvements to the stove tops. Chrome has proposed to plus the price of the stove top by $0.90 $0.80 represents the additional costs of quality improvements and a $0.10 profit mark-up.The Electric Stove Division does not see the improvements as necessary changes since there is no change in engineering specifications, the changes made were never requested or approved, consumers may not even notice or want the change, and believes that the improvements made will only bring the quality level of the stove tops to the competitors level. Ultimately, Electric Stove sees these quality changes as being more subjective rather than objective. The engineering department of the manufacturing staff has verified that the new improvements were of superior quality then of their competitors and the costs were reasonably allocated.thermostatic Control Problem Electric Motor Division has been able to consistently reduce the price of the thermostatic control units to mirror the price of Monson Controls Corp. from $3.00 in 1984 to $2.40 in 1987. Monson has decided to further reduce their price to $2.15, which according to the general manager of Electric Motor Division, would result in selling at a button rather than a profit. The GM believes that they are just as efficient as Monson, therefore Monson must be selling at a injustice at $2.15. Laundry Equipment and the Refrigeration Division both require a total of 120 000 units for their division (100 000 units for Laundry and 2 000 units for Refrigeration).Refrigeration has made an agreement with Electric Motor thatthey will be able to competitively source to the lowest bidder, in this case, Monson for $2.15. Laundry Equipment believes that for such a large order, they could probably defy a lower price than $2.40 if they were to outsource. In reviewing this dispute, the Finance Staff stated that there was excess capacity in the market that results in soft prices. The purchasing staff believe d that Refrigeration could purchase their requirements at $2.15 for the next year but if the corporations orders were all place externally, the price would rise to $2.40 through ontogeny in demand or limited supply.Considering the 120 000 units of thermostatic control that is required by both the Laundry Equipment and the Refrigeration Division, and the fact that their requirement is large enough to increase Monsons price of $2.15 to $2.40, General App. will have to outsource and purchase from within. Assuming that the more units General App. outsources, the price will gradually increase due to the increase in demand.The best combination of outsourcing and purchasing from within would be to outsource 60 000 units at an estimated price of $2.25 and purchase 60 000 units internally for $2.40. This would cost the organization $279 000, a savings between $1 000 and $9 000. The average price per unit is $2.325, less than the cost of the market price if the required volume was completel y outsourced. It is also less then purchasing the entire volume internally. This would result in Laundry Equipment saving $7 euchre and costing $3 500 to Refrigeration as oppose to purchasing their required volume at $2.15.Transmission Problem Laundry Equipment has previously entered into an agreement with Thorndike Machining Corp to purchase one-half of its transmission for 10 years. Two years before the expiration of the agreement, General App. decided to manufacture their own transmissions to extend their capacity. Thorndike proposed a price reduction of $0.50 consistently for the next two years with a new economy transmission unit at a price of $10. The Gear and Transmission Division estimates that they base replicate a comparable model of the economy transmission at a competitive price of $9. The Gear and Transmission Divisions proposal failed to eliminate the cost of design features of $0.50 per unit. This would bring the proposed totalunit cost for GT from $11.66 to $11.11 . This error makes Thorndikes proposed price of $11.21 appear more favourable.BibliographyAnthony, Robert N., and Vijay Govindarajan. Management Control Systems. New York McGraw-Hill/Irwin, 2000.