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INTERMEDIATE MANAGERIAL ACCOUNTING II – BSAD 322

Assignment #2

Zumwald AG

Due: March 16, 2012 (In-class)

A behavioral consideration in the design of a Management Control System is to consider the most appropriate reward systems to motivate employees. In most organizations, compensation is part of a complex bundle of factors that motivate people to work in the organization’s best interest. Organizations must consider incentives within the larger context of motivation.

At Zumwald AG, decentralization created the profit centre designations for its divisions. The autonomy of division managers has placed emphasis on division managers` decisions.

In preparing the assignment:

This assignment is worth 10% of your final mark.

The assignment may be completed in groups of three (3). Your assignment should include the ID no. of each group member.

1. The assignment should be typed, double-spaced and a maximum of three (3) pages in length including any exhibits.

2. Points will be awarded for grammar and spelling. Points will also be awarded for clarity, format and quality of writing in the presentation of the assignment.

3. Any assumptions made should be explained within the context of the assignment. The impact of any of these assumptions should also be explained.

Zumwald AG*

In August 2012, a pricing dispute arose between the managers of some of the divisions of Zumwald AG. Mr. Rolf Fettinger, the company’s managing director, had to decide whether to intervene in the dispute.

THE COMPANY

Zumwald AG, headquartered in Cologne, Germany, produced and sold a range of medical diagnostic imaging systems and biomedical test equipment and instrumentation. The company was organized into six operating divisions. Total annual revenues were slightly more than €3 billion.

Zumwald managers ran the company on a highly decentralized basis. The managers of each division were...