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| ABC is a major retailer with over 52 department stores. The marketing department is responsible for
Conducting marketing surveys. Recommending locations for new store openings.
Ordering products and determining retail prices for the products.
Developing promotion and advertising for each line of products.
Determining the pricing of special sale items.
The marketing department has separate product managers for each product line. Each product manager is given a purchasing budget by the marketing manager. Product managers are not rotated among product lines because of the need to acquire product knowledge and to build relationships with vendors. A subsection of the department does marketing surveys.
In addition to ordering and pricing, the product managers also determine the timing and method of product delivery. Products are delivered to a central distribution center where goods are received, retail prices are marked on the product, and the goods are segregated for distribution to stores. Receiving documents are created by scanning in receipts; the number of items scanned in are reconciled with the price tags generated and attached to products. The average product spends between 12 and 72 hours in the distribution center before being loaded on trucks for delivery to each store. Receipts are recorded at the distribution center, thus the company has not found the need to maintain a receiving function at each store.
A control deficiency associated with the given scenario is A. There is no receiving function located at individual stores. B. The product manager negotiates the purchase price and sets the selling price. C. The store manager can require items to be closed out, thus affecting the potential performance evaluation of individual product managers. D. Evaluating product managers by total gross profit generated by product line will lead to dysfunctional behavior. |