AirTex Aviation Case Analysis Essay

965 Words Sep 15th, 2013 4 Pages
Case: Airtex Aviation
Synopsis
Ted Richards and Frank Edwards, long-time college friends and Harvard Business School graduates, purchased Airtex Aviation on December 29, 1989. At the time of the purchase, Airtex Aviation, located in Center County, Texas, was finishing up a fiscal year in which they had losses of sales totaling 500,000 dollars and a negative net worth. So, it was obvious to Frank and Ted early on that they were going to have their work cut out for them in order to turn their “fixer-upper” into a successful, profitable business. Ted and Frank knew little about the aviation industry at all going into the purchase, so they were planning on relying completely on their management skills to achieve their goals.
Problems
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All of these charges were predetermined, calculated, and announced twice yearly, giving department managers the ability to manage their expenses with the knowledge of this predetermined charge.
To educate department managers, Frank and Ted instituted the Daily Department Report, which required departments to submit internally consistent information about operations and accounting within the department. These included the expenses incurred during the day and the flow of funds into or out of the department, categorized by type. Cash and checks received in the mail was deposited daily, with photocopies of all the checks included in the daily report. Each department would turn in these reports daily to Accounting, with sales balanced against receipts, inventory against fuel flows, and receivables proven-out. Once these were implemented, each department had to hire an additional person to do the meticulous report. These reports also made the Accounting Department all but obsolete. After they posted the information from the reports, they could worry about other corporate issues, like taxes. Eventually, only one person worked in the Accounting Department, as all of the detailed work was in the individual departments. Once Ted implemented the control system, he could sit back and be the emotional leader that he really wanted to be.
Advantages of the New Control System
The new control system will help provide more accurate financial information to each

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