Budgeting Case Study (graded)
Let's start the week by discussing Case 8-30 on pages 389
and 390. First, let's discuss how the budgeting process as
employed by Ferguson & Son Manufacturing Company
contributes to the f
...
Budgeting Case Study (graded)
Let's start the week by discussing Case 8-30 on pages 389
and 390. First, let's discuss how the budgeting process as
employed by Ferguson & Son Manufacturing Company
contributes to the failure to achieve the budgeted costs.
What could they do differently that might lead to better
budget outcomes?
1. Identify the problems that appear to exist in Ferguson & Son
Manufacturing Company's budgetary control system and explain how
the problems are likely to reduce the effectiveness of the system.
This budgetary control system has multiple issues that affect its overall
performance. One of the major issues with this system is: for starters
the performance related to the overall budget is influenced by many
uncontrollable factors. The rushing of orders and the inability to
properly maintain the budget are just a few examples. This causes the
variance and standard deviation reports to serve almost no function in
evaluating the performance and locating controllable factors, which in
turn could lead to improved performance. Ultimately with these factors
in consideration, one can see that this system does not encourage
coordination amongst departments.
Respond Edit
Do you think because the overall budget is pretty much based on a lot
of uncontrollable factors that the company spends more money then
they should?
Respond
Good question Catherine!
Yes, and I also think that another issue is the lack of coordinated goals
within the company. Tom Emory was made to believe that the highest
quality of output was the company goal but as he went along the goal
appeared to be having the lowest cost possible for the product. Since
employees are unaware of overall company goals they cannot make
the best decisions that further the advancement of said goals.
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