I think it is best to take the ques

I think it is best to take the questions in order, since Questions 1 and 2 provide the big picture.Following a discussion of Question 2, 1 ask whether the divisions have the authority to purchasenew fixed assets. If BPI is like most corporations, the answer would be no, or at least no for fixed assets that exceed a certain threshold amount. New equipment and plant renovations probably exceed the threshold.Thus, fixed asset replacement is probably Mr. Baum's concern, and making the plants into in-vestment centers would entail measuring ROA on current assets only. This would avoid the problem that divisions with relatively new fixed assets will have a lower ROA, other things equal, thandivisions with old fixed assets. Of course, old assets would not be as productive as new assets, and it may be that some of BPI's problems in achieving a satisfactory net income are a result of old, somewhat inefficient, and perhaps even technologically obsolete equipment. This depends on the kinds of technological advances that have been made in each division's industry.Questions 3 and 4 can be somewhat freewheeling, but it is important to get out some of theideas listed above in the analysis section, since these ideas are what drive the needed changes in the MCS.In discussing Question 5, I find it useful to distinguish between the three issues that are of concern to Mr. Baum, and some that he apparently has not considered.I sometimes list his three concerns on the board to structure the discussion a bit, and then only make sure that students’ comments are responsive to one of the issues. If students make comments that are responsive to BPUs needs (but not Mr. Baum's concerns), I list these separately.At some point in this discussion (but with at least 15 minutes or so left in the class), I either refer to the separate list, or ask a question like “does BPI have any MCS needs that Mr. Baum has not mentioned?” Here, I try to classify students comments into the three categories discussed in theAnalysis Section: Responsibility centers, behavioral issues, and measurement issues.I conclude the class by emphasizing that these three categories are highly interdependent. Ifthere tire no behavioral consequences (as seems to be the case at BPI), then it doesn't matter what kind of responsibility center structure you have. If you create profit centers, you must be sure to measure performance, and distinguish between controllable and uncontrollable items (although I would certainly not treat revenue as “uncontrollable,'' by the DGMs, as Mr. Baum does). And finally, you must have goal congruence. Here, I ask students to speculate on what a DGM is motivated to do at present and how well that coincides with the goals of the company.