Master Budgets & Responsibility Accounting

This response should be 100-200 words in length.

Responsibility budget focuses on holding departments accountable for spending. In the

case presented, determine who should be held accountable for the breakdown and the

additional cost that Paula has to pay. Also discuss how creating responsibility centers

would hold the appropriate manager accountable for over-spending in the following

scenario.

Paula Beane owns a restaurant franchise that is part of a chain of southern restaurants.

One of the chain's popular breakfast items is biscuits and gravy. Central Warehouse

makes and freezes the biscuit dough, which it then sells to the franchise stores where it

is thawed and baked in the individual stores by the cook. Each franchise also has a

purchasing agent who orders the biscuits (and other items) based on expected

demand. One of the freezers in Central Warehouse breaks down and biscuit production

is reduced by 25% for 3 days. During those 3 days, Paula's franchise runs out of biscuits

but demand does not slow down. Paula's franchise cook, Betty Baker, sends one of the

kitchen helpers to the local grocery store to buy refrigerated ready-to-bake biscuits.

Although the customers are kept happy, the refrigerated biscuits cost Paula's franchise

three times the cost of the Central Warehouse frozen biscuits, and the franchise loses

money on this item for those 3 days. Propose alternatives in order for the restaurant to

reduce operating costs.