120. CSO: 1B2a LOS: 1B2b
The production manager of the Super T-shirt Company is responsible for the activity of
her department and the costs associated with production. Super T adheres to a
responsibility centered budget process, and the manager’s performance is measured by
how well she performs to budget. Recently, the dark horse team won the local college
basketball tournament. As a result, the sales department, which operates as a profit
center, received an order for 10,000 t-shirts, but only if they could be delivered in three
days. The production manager said she could meet the schedule, but only by incurring
overtime pay that would cause her to be over budget for hourly wages paid. What would
be the best course of action for the sales department and the production manager to
undertake in this case?
a. Accept the order and overrun the production manager’s budget.
b. Refuse the overtime and produce only what the production department is capable
of while staying within the budget.
c. Accept the order and ignore the effect on the production department budget when
conducting the performance review.
d. Charge the overtime to the sales department’s budget.
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