Multisite examples - the company structure of an aircraft manufacturerOur fictional manufacturer of passenger aircraft has three production units and one sales unit. All business units and departments of the aircraft manufacturer are located and registered in the USA. Production units A, B, and C each manufacture a different type of aircraft. The table displays the type of aircraft manufactured at each production unit.
Sales unit S handles the sale of the aircraft manufactured by production units A, B, and C. Each production unit equips the planes they build with the same type of oxygen mask. Production unit A manufactures the oxygen masks themselves. Units B and C each buy the oxygen masks from a different local supplier. Each unit is responsible for its own management accounting. Finance Financial reporting is performed centrally for the entire organization, but the production units and the sales unit have their own management accounting. Costing Because the production units and the sales unit have their own management accounting, the standard costs for the completed aircraft and the oxygen masks are registered for each business unit. At production units A, B, and C, the standard costs of the completed aircraft are based on local production. The production costs are different for each production unit. At sales unit S, the standard costs of each type of aircraft are based on the internal transfers from the production units. At production unit A, the standard costs of the oxygen masks are based on local production. At units B and C, the standard costs of the masks are based on local procurement. Production units B and C have different standard costs for the same type of oxygen mask. Production At production unit A, the oxygen masks are manufactured in a dedicated work center. In this simplified example, the oxygen mask is a component of an aircraft. The aircraft are manufactured in a production hall. In this production hall, the oxygen masks are fitted into the airplane cabins. At production units B and C, the aircraft are also produced in production halls. In these production halls, the purchased masks are fitted into the aircraft cabins. Planning Production units A, B, and C are responsible for their own production planning. Logistics At each production unit, the completed aircraft are transferred from an inspection warehouse to a finished goods warehouse. The inventory stored in the finished goods warehouses is owned by sales unit S. From the finished goods warehouses, the aircraft are shipped to the customers. Each production unit hires a different carrier to transport the aircraft to the customers. At unit A, the completed oxygen masks are transferred from the oxygen-mask work center to a shop floor warehouse. From the shop floor warehouse, the masks are issued to the work centers where they are fitted into the airplane cabins. At unit B and unit C, the purchased masks are received in a normal warehouse from where they are issued to the work centers. Purchase At production unit B, purchase office B handles the purchase of the oxygen masks from production unit B’s local supplier. Similarly, at production unit C, purchase office C handles the local purchase of the oxygen masks from production unit C’s local supplier. Sales The sale of the completed aircraft from each production unit is handled by sales unit S. The sales office of sales unit S is located on the premises of production unit A. Sales unit S owns the inventory of the finished goods warehouses located at product units A, B, and C. Intercompany trade Each production unit charges sales unit S for each transfer of completed aircraft from the inspection warehouse to the finished goods warehouse.
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