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Curriculum Center Browse Bibliography Build EPacket Pricing Structure Distribution Process Management Control in Nonprofit Organizations
Barça Products, S.A.
Young, David W.
Functional Area(s):
   Management Control Systems
   For Profit
Difficulty Level: Intermediate
Pages: 3
Teaching Note: Available. 
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First Page and the Assignment Questions:
Let’s face it, Lew.  Our new management control system is in trouble. As far as I can tell, Frank [Baum, Barça Product’s president] doesn’t use the reports in any meaningful way.  In fact, he told me this afternoon that he finds the reports useless.  He said that the variances from budget always seem to be large but there’s always a good explanations.  More importantly, Frank says that some divisions are showing favorable variances when he knows they’re doing a poor job!

    Hank Anderson, Controller of Barça Products, S.A., was speaking to Lew Carroll, one of his deputies. Mr. Carroll had come to Barça three years before, from a large industrial company where he had been a budget analyst in one of the divisions. He was responsible for developing and installing the present management control system. The system had gone into effect 18 months ago, and for the first year, it was considered experimental.  At the beginning of the current fiscal year, it became fully operational. Now, some four months later, Mr. Baum was questioning its utility, and Mr. Anderson evidently was agreeing. Mr. Carroll was confused:

I don’t understand, Hank. The system is similar to the one I used at IP [Industrial Products] and it worked really well there. If a manager deviated from the budget, he or she had to have a really good explanation, and, even then, there were consequences.

Mr. Anderson responded:

Well, it may have worked at IP, but it isn’t working here. I’ll arrange for you to talk with Frank about it. Then, I want you to figure out how to make the system work better.

    Barça Products began during World War II as a family-owned manufacturer of cotton textiles for the military. The original plant was located in the town of Sitges, just south of Barcelona. A few years after the war, the family sold the company. The new owners renovated the plant, built a knitting plant nearby, and purchased a woolen plant. By 1970 Barça’s annual profit was € 3 million on a sales of about € 28 million. . . .


1.      What kind of responsibility center is a division at Barça? Is the responsibility center design a good one?  Why or why not?

2.    Exhibit 2 shows negative variances for Sales volume, raw material usage, and advertising and sales promotion during the month of April. What is a plausible explanation for each negative variance?

3.    Why might the most capable DGM show the poorest financial performance? Why might a DGM who is doing a poor job show good financial performance?  Please be specific about this matter for the Cotton Textiles Division. What additional information would you like to have to assist you in your assessment of this division’s performance?  

4.     What changes should be made to the MCS to make it more responsive to Mr. Baum’s concerns and Barça’s needs.