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ACCT 505 Week 4 Discussion 1 (2021)

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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. [Show More]

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