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Q: Hi-tech Instruments manufactures and sells semiconductors. Hi Tech's sales and marketing divisions are organized along product lines - amplifier ICs, audio ICs, equalizers, and so on. the Manufacturing Division produces semiconductors for all the sales and marketing divisions. During the planning phase, each sale and marketing division specifies the quantity of each type of product to be manufactured. Senior management then assigns the task of manufacturing semiconductors to different plants in the Manufacturing Division. Senior management also determines the manufacturing schedule on the basis of detailed studies that have been done to measure the time and cost of manufacturing different types of semiconductors. Manufacturing managers are evaluated based on achieving target output within budgeted costs.
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Are the manufacturing plants in the Manufacturing Division cost centers, revenue centers, profit centers or investment centers? Explain.
Hi-tech Instruments is considering decentralizing its marketing and manufacturing decisions by letting manufacturing and marketing managers directly negotiate the prices for manufacturing various products.
How should Hi-tech evaluate managers under this proposal?
Would you recommend that Hi-tech Instruments decentralize its marketing and manufacturing decisions? Explain.