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the types of decision areas that should be transferred to the new divisional managin 597846

A long-established, highly centralized company has grown to the extent that its chief executive, despite having a good supporting team, is finding difficulty in keeping up with the many decisions of importance in the company.

Consideration is therefore being given to reorganizing the company into profit centres. These would be product divisions, headed by a divisional managing director, who would be responsible for all the division’s activities relating to its products.

You are required to explain, in outline:

(a) the types of decision areas that should be transferred to the new divisional managing diretors if such a reorganization is to achieve its objectives;

(b) the types of decision areas that might reasonably be retained at company head office;

(c) the management accounting problems that might be expected to arise in introducing effective profit centre control.

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