Management Control System Case Study
Case Study: AirTex Aviation (Textbook p. 246)
Suggested practice/discussion questions:
Group Presentation
1. Did AirTex need a new control system at the time of takeover?
2. Evaluate the control system that Frank and Ted implemented.
Class Discussion
3. Should anything have been done differently?
Case Study: AirTex Aviation
“Hello, Sarah. This is Ted Richards.” Ted was on his way to resign from his job. He and his business partner Frank Edwards had just bought AirTex Aviation, a floundering enterprise on the verge of bankruptcy, and were excited about putting their business school education to work. The two had scraped together $500,000 so that AirTex would have at least a little cash to pay some bills. With the amount they had contributed, AirTex had a total of $515,000 in the bank.
“Oh, Mr. Richards,” Sarah said, “I’m so glad you called. When will you be in? I have a few checks for you to sign.”
“I should be in tomorrow. What are the checks for?”
“I’ve written checks for only our most pressing bills,” she said. “I tried very hard to make sure that only those that are most important be paid.”
“That’s fine,” Ted replied. “What’s the total of the checks you’ve written?”
“$510,000,” she said.
Ted nearly dropped the phone. “Let’s discuss this when I get into the office.”
He drove down to AirTex the next morning to speak with Sarah Arthur, the company’s account- ant. As it turned out, his first day owning his own company would not turn out exactly as he had planned:
I had envisioned that when I bought my company, I would walk in the front door the next morning, and everyone would bow down to me. There would be a brass band playing, or something. Instead, I walk in through the back door (a) realizing that I have a crisis on my hands, (b) hoping no one is going to see me so I can deal with this crisis, and (c) of course, not really knowing how I’m going to deal with it. What I did was say to Sarah Arthur, “We are not going to pay these bills.” Well,
Suggested practice/discussion questions:
Group Presentation
1. Did AirTex need a new control system at the time of takeover?
2. Evaluate the control system that Frank and Ted implemented.
Class Discussion
3. Should anything have been done differently?
Case Study: AirTex Aviation
“Hello, Sarah. This is Ted Richards.” Ted was on his way to resign from his job. He and his business partner Frank Edwards had just bought AirTex Aviation, a floundering enterprise on the verge of bankruptcy, and were excited about putting their business school education to work. The two had scraped together $500,000 so that AirTex would have at least a little cash to pay some bills. With the amount they had contributed, AirTex had a total of $515,000 in the bank.
“Oh, Mr. Richards,” Sarah said, “I’m so glad you called. When will you be in? I have a few checks for you to sign.”
“I should be in tomorrow. What are the checks for?”
“I’ve written checks for only our most pressing bills,” she said. “I tried very hard to make sure that only those that are most important be paid.”
“That’s fine,” Ted replied. “What’s the total of the checks you’ve written?”
“$510,000,” she said.
Ted nearly dropped the phone. “Let’s discuss this when I get into the office.”
He drove down to AirTex the next morning to speak with Sarah Arthur, the company’s account- ant. As it turned out, his first day owning his own company would not turn out exactly as he had planned:
I had envisioned that when I bought my company, I would walk in the front door the next morning, and everyone would bow down to me. There would be a brass band playing, or something. Instead, I walk in through the back door (a) realizing that I have a crisis on my hands, (b) hoping no one is going to see me so I can deal with this crisis, and (c) of course, not really knowing how I’m going to deal with it. What I did was say to Sarah Arthur, “We are not going to pay these bills.” Well,