ABC is a major retailer with over 52 department stores. The marketing department is responsible for 1. Conducting marketing surveys 2. Recommending locations for new store openings 3. Ordering products and determining retail prices for the products 4. Developing promotion and advertising for each line of products 5. 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. Each product manager is evaluated on a combination of sales and gross profit generated from their product line. Many products are seasonal and individual store managers can require that seasonal products be "cleared out" to make space for the next season’s products.
Requests for purchases beyond those initially budgeted by the marketing manager must be approved by the marketing manager. Which of the following statements regarding this control procedure is correct? The procedure I. Should provide for the most efficient allocation of scarce organizational resources II. Is a detective control procedure III. Is not necessary because each product manager is evaluated on profit generated, thus this control is redundant