I. Executive Summary

The group provided recommendations on how to better the control systems and be aftering procedures of Stewart Box. Stewart Box is a profitable moderate-sized fabrication company that has several countries for betterment in its accounting. planning. budgeting and pricing methods. The group highlighted these failings and gave proposals as to how the company can significantly better its operations.

II. Case Context

Stewart Box is a packaging company that manufactures paperboard and cartons. Its poster board division sells to external clients and supplies natural stuffs to the carton division. Outlined in the instance are the planning and control systems that Stewart Box has in topographic point.

III. Problem Definition

There is a demand to reexamine the control systems of Stewart Box to find if these are configured to decently measure the public presentation the company and its sections. Its direction processs besides need to be assessed to set up if the right people are being involved.

IV. Framework for Analysis and Areas of Consideration

The group examined each system and evaluated them to see if they are aligned with Stewart Box’s organisational construction and nature of concern and if the right people are involved. The group besides scrutinized the control system to see if this efficaciously measures each department’s public presentation and if it can nail the beginnings of any discrepancy.

V. Analysis

Below are the assorted systems that the company has in topographic point. with the corresponding analyses.

Accounting

The company utilizes a job-cost accounting system utilizing standard costs. These standard costs are based on the one-year estimations of labour and mill operating expense costs. If these estimations were inaccurate so the criterion costs would be wrong as good. The system must be more dynamic and must analyze on a more regular footing ( e. g. monthly or quarterly ) the allotment of the operating expense costs and do the necessary accommodations.

Additionally. job-costing requires the fixed costs to be allocated to each occupation. If the allotment is wrong. so the costing will be wrong. These inaccuracies will be passed on to the client or to the carton division. As with the calculation of the criterion costs. these allotments must be scrutinized exhaustively and often to minimise any mistakes. Otherwise. these mistakes will be reflected in direction studies such as Exhibits 4 and 5.

Exhibit 4 lists the costs and grosss associated with the poster board and carton divisions. The advantage of this is that the company can easy see which of its divisions are doing money. This will let it to do strategic determinations such as whether to outsource the fabrication of poster boards.

The disadvantage is that the control system is based on the concern units. non on the organisational construction. The organisational construction is based on the operational maps of the company. i. e. gross revenues. production and selling. However in the control system. the figures for these functional groups are divided between the board factory and the carton mill. This makes it hard to nail the beginning of the discrepancies since the disbursals are grouped together. Therefore if a negative discrepancy appears. it will non be instantly evident what the beginning of the discrepancy is.

Strategic Planning

There is a obscure differentiation between undertaking control and direction control. Overseers attend the strategic planning meetings. even though they should merely be concerned with the execution of the strategic determinations.

Budget Preparation

In the initial budget readying. the Vice President for Production nor any representative from the fabricating side is included. What the President and Marketing VP agree on is communicated to the duty centres. These may do the budget biased in favour of selling.

Merchandise Pricing

It is really enigmatic why the current pricing system of Stewart Box varies from the corporate criterions. The company should reexamine its pricing strategy to see where the disagreements originate.

VI. Decision

The organisational construction and the control system must be better aligned. The control system must be farther improved to efficaciously turn up the beginnings of the discrepancies. The company must besides make a better occupation in dividing the strategic undertakings from the tactical undertakings for better answerability and execution.

VII. Basic Justifications

As mentioned in the analysis. alining the organisational construction with the control system will enable the company to turn up the discrepancies faster. It will besides give answerability to the appropriate forces.

VIII. Implementation Recommendations

For big companies. the group would urge that the organisational construction be altered to divide the two fabrication sections. Then these sections could hold their ain gross revenues. selling. production and finance forces. This construction will let the company to better program and budget its operations. every bit good as locate the beginnings of discrepancies.

Since Stewart Box is a moderate-sized company. doing such organisational restructuring will merely take to inefficiencies since extra forces may necessitate to be hired. Thus a better option is to add more item to the control systems. For illustration. exhibit 4 should be farther broken down to see any discrepancies associated with selling.

The company should do betterments with respects to dividing strategic from tactical determinations and make up one’s minding which people are involved. Strategic planning Sessionss should affect merely the direction squad. After the program has been developed. each frailty president can pass on these determinations to their subsidiaries.

Production should be involved at the start of the budget reappraisal so that inputs from the fabricating side such as works capacity or forces will be included.

Since overcapacity should necessarily take to price-cutting. the company should look into how it is able to cite monetary values above their estimations. It’s extremely likely that concealed costs exist.