Universal Power Machinery (MUP) designs and
manufactures specialized equipment for a wide range of industries.
For a number of years the company's maintenance division, which has
been organized as a cost centre, has provided services free of
charge to the company's user departments (production, distribution,
research, marketing, and so forth).
During the last three years, requests for maintenance have
increased considerably and as a result of that, quality and
timeliness of services provided are becoming a significant issue.
In response to that issue, the top management established a task
force to review the maintenance division operations. The task force
recommended the maintenance division to be converted from a cost
center to a profit center and the use of a charge-back system for
the maintenance services (i.e. users to be billed for services
performed).
Required:
1. How should the manager of the maintenance division be evaluated
(i.e. as a cost centre)?
2. If the company switches the maintenance department from a cost
centre to a profit centre:
A. What will likely happen to the number of user
service requests? Why?
B. How should MUP evaluate the manager of
the maintenance division?
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