(Open book management; writing) Laura Johnson, Technical Instruments Division manager of Worldwide Electronics, attended a 30 minute seminar on open book management recently. As a result of the seminar, she decided to implement some open book management practices in her division. She began the process today when she received the latest quarterly results for her division.
Joey Thompson, the production supervisor of the finishing department in Johnson’s division, was surprised to receive the following note in his afternoon mail.
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FINISHING DEPARTMENT COST ANALYSIS |
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This Quarter |
This Quarter Last Year |
Last Quarter |
|
|
Direct material |
$ 95,000 |
$ 75,000 |
$ 90,000 |
|
Direct labor |
925,000 |
840,000 |
940,000 |
|
Material based overhead |
27,000 |
22,000 |
23,000 |
|
Labor based overhead |
413,000 |
382,700 |
396,500 |
|
Machine based overhead |
657,000 |
589,000 |
617,000 |
As corporate controller of Worldwide Electronics, you are surprised when Joey Thompson calls your office and asks to meet with your staff to discuss the financial report and to discuss the meaning of “overhead.” As you consider how to deal with him, you begin to contemplate the memo that you are going to write to Laura Johnson. Before any decisions are implemented, you realize that she can use your expertise to design and implement open book management practices. As you write the memo, you know that your suggestions must be specific, positive, and informative. Write the memo to Johnson.