University of Dhaka

Course Name: Management Control System

Course Code: 503
Topic: Case study on NYPRO Inc.
Submission Date: 20/11/2017

Submitted By:
Md. Sajjad Azim; ID: 08-085.
Palash Saha; ID: 08-015.
Tahrima Rahman Barsha; ID: 08-075.
Samiha Ahmed; ID: 08-075.
Khairul Islam Shuvo; ID: 08-014.

Master of Business Administration (MBA),

Department of Management Information Systems (MIS),
Faculty of Business Studies, University of Dhaka

Submitted To:
Nymatul Jannat Nipa
Lecturer
Department of Management Information Systems (MIS),
Faculty of Business Studies, University of Dhaka

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Contents
Company Description ................................................................................................................ 3

Case summery ............................................................................................................................ 4

How this case is related to the chapter? ..................................................................................... 5

Case Questions ........................................................................................................................... 6

1. Do you think the daily P&L should be continued? Was it based on good cost accounting
data and principles?................................................................................................................ 6

2. What others measures would you recommend? Should they replace the daily P&L, or
should they be additional? ..................................................................................................... 6

3. Do you see any opportunity to employ an ABC-type cost system? ............................... 7

4. Given the daily and monthly reports, was this enough control to manage this growth
company? Did they need more balance in their reporting system? ....................................... 7

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Company Description
NYPRO is a real pro when it comes to injection molding. The company makes plastic parts
used in devices that range from cell phones and electric razors to inkjet printer cartridges and
personal computers. NYPRO's three global units include Consumer & Electronics, Packaging,
and Healthcare (medical devices such as single-use fluid and drug management components).
Although custom-precision plastic-injection molding is NYPRO's core business, the company
also offers assembly services to other manufacturers. Major customers include Dell, Nokia,
and Procter & Gamble. Established in 1955, NYPRO was acquired by electronics
manufacturing services provider Jabil Circuit in 2013. Now almost 2000 personnel are working
in this organisation. During the past 20 years, it had grown from a single plant in central
Massachusetts to 18 production facilities located throughout the world.

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Case summery
NYPRO’s corporate controller, Ted Lapres was worried that the rapid growth in the
information technology was making its internal reporting system obsolete. He suspected they
might even measure the wrong things. The heart of the NYPRO’s internet performance system
was the daily P&L report.

In general, the main customers of this organisation is the Fortune 100 companies. The sales
rate of this organisation were doubling in size of every five years. NYPRO was divided into 23
profit centers. Each profit centers and the general managers were judged based on their stand-
alone performance. Another interesting characteristics fact of this organisation is that each
profit center has its own legal entity with an internal board of directors.

The corporate sales growth of this organisation was responsible for all customer pricing. They
used a cost based pricing model, adding the material cost, machine rate, times the cycle time.

The daily P&L served as the cornerstone report for the profit centers, there were other key
weekly and monthly report. The weekly report is focused on the key operational data and the
monthly report were mainly the financial information.

NYPRO had a quarterly profit sharing plan for all the employees. It was based on gross margin
percentage compared to standard cost. The incentive funds were pooled for each facility and
distributed based on the salary level.

The corporate controller Ted knew that without reasonable coordination and control the success
of NYPRO could unravel quickly. In the same time, the company culture will not permit a
growth in the bureaucracy. The strategy of seeking a few large customers put pressure on
pricing and added the risk of sales dependency on a few.

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How this case is related to the chapter?
This chapter describes the notion of different responsibility centers. A responsibility center is
an organization unit that is headed by a manager who is responsible for its activities.
Performance of these centers is judged by the criteria of efficiency and effectiveness.

There are four types of responsibility centers, they are:

• Revenue centers

• Expense centers

• Profit centers

• Investment centers

NYPRO Inc. is a flat decentralized organization with a lean headquarters staff. Each molding
facility was a profit center with a responsible general manager and controller. As mentioned
before, profit center is one of a kind of responsibility center. This case clearly describes the
idea of profit center, and helps us to get an understanding of how a profit center works in an
organizational set up.

One of the many reasons that made NYPRO flourish its profits was its decentralized approach.
This helps us to understand the importance of responsibility centers in helping an organization
to thrive in any competitive market.

The notion of profit centers is what that binds the chapter with the case of NYPRO Inc.

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Case Questions
1. Do you think the daily P&L should be continued? Was it
based on good cost accounting data and principles?
No, it should not. Although the daily P&L report has given so much benefits to the Compnay,
and it has been used as the scorecard for corporate management to judge the performance of
each production facility and for the general managers to evaluate their operations. As the
Company growth and having 44 locations in 11 countries, the daily P&L has lost its edge. In
other words, the activity has become less-efficient to do.

Actually the daily P&L is not based on good cost accounting data and principles. It is because
the usual P&L report are counted in monthly or yearly basis.

2. What others measures would you recommend? Should

they replace the daily P&L, or should they be additional?
Activity base report, this activity base report will be used to measure the performance of the
profit centre replacing the daily P&L.

The other measurement that we recommend is job order costing. Since with job order costing
we can know overhead cost for every job order.

Implementing ERP system, ERP system is an HRD modules, which is an integrated system
used to measure activity performance.

Job order costing in not replacing daily P&L but company must have Job order costing besides
P&L report.

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 3. Do you see any opportunity to employ an ABC-type cost
system?
Yes, there is. The ABC-type cost system can be applied to replace the old system. It because
the old system ordering needs paper to be filled, and it took so much time to do the task.

ABC-type cost system is a costing method design to provide information to manager to make
strategic decision. It also can be used to other decision regarding cost and how to make profit.
ABC-type cost system has the advantage to fill the gap between inefficiency (fill in process)
and the result.

Below is criteria for company that use ABC cost system:

 Company that use huge capital (many production machine).

 Company that have product diversification.
 Diversification product use same facility.
 Every product have same production process.

4. Given the daily and monthly reports, was this enough

control to manage this growth company? Did they need
more balance in their reporting system?
The control that were used now need a support system – such as a backup system – to help the
company growth in the future. With the current control method, there is not enough control to
manage this growth of the company.

As explained before, the daily P&L report is inefficient. So, an additional balance is surely
needed to enhance the reporting system. Which has more considerations to put in, and the
outcome is more comprehensive reporting tools.