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P
rofessor Kenneth A. Merchant wrote this
t
eaching note as an aid to instructors using the Leos Four-Plex Theater case.
Marshall School of Business
University of Southern California
Leos Four-Plex Theater
Teaching Note
Purpose of Case
This case is intended as an in-class, warm-up case. It is particularly useful on the first day of
class where students cannot be made to prepare a longer case prior to class. The case motivates
Questions
1. Where is the theaters control system lacking? Are the controls themselves weak or
2. What control improvements would you suggest for Leos Four-Plex?
Analysis
I recommend starting the discussion by asking students to list the controls discussed in the case
and the purpose of each. That will lead to the preparation of the chart shown in Exhibit TN-1
below. Then the discussion can move into the analysis of the problems and possible solutions:
1. The cashiers collect less cash than the value of the tickets sold (or missing). The common
2. Some refreshment stand sales seem to be lost because the attendants do not collect cash
from the customers (perhaps their friends). There are several possibilities here. One is better
direct supervision. Another is separation of duties between the person who rings up the sale
and the person who delivers the refreshments to the customer. (The delivery would not be
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3. Tickets of the wrong color or wrong date are found in the stub boxes. The ticket-takers must
4. The manager is giving away too many passes, including some for unacceptable purposes.
The pass policy must be clarified, and the manager must be warned not to abuse the
5. The ticket collectors are apparently admitting some friends who had not bought tickets.
Supervision, or even better undercover surveillance, is probably the best solution. If ticket
collectors are caught, they should be dealt with harshly to discourage others from engaging
in the practice.
Exhibit TN-1
Leos Four-Plex Theater
Controls Used at the Theater and Their Purposes
Controls Purpose
Color-coded and dated tickets Ensure that the individual (4) theaters will not
