Boston

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Colin Drury, Management and Cost Accounting – Boston Creamery

Boston Creamery
Professor John Shank, The Amos Tuck School of Business Administration
Dartmouth College
This case is reprinted from Cases in Cost Management, Shank, J. K. 1996, South Western Publishing
Company. The case was prepared by Professor John Shank from an earlier version he wrote at
Harvard Business School with the assistance of William J. Rauwerdink, Research Assistant.

This case deals with the design and use of formal "profit planning and control" systems. It was originally set in an ice cream company in 1973, a few years before the advent of "designer ice cream".
Frank Roberts, Vice-president for Sales and Marketing of the Ice Cream Division of Boston
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Actually, this forecast was the same as the latest estimate of 1999 actual litre sales. Since the 2000 budget was being done in October of 1999, final figures for 1999 were not yet available. The latest revised estimate of actual litre volume for 1999 was thus used. Rather than trying to get too sophisticated on the first attempt at budgeting, Mr. Peterson had decided just to go with 1999's estimated volume as
2000's goal or forecast. He felt that there was plenty of time in later years to refine the system by bringing in more formal sales forecasting techniques and concepts.
This same general approach was also followed for variable product standard costs and for fixed costs.
Budgeted costs for 2000 were just expected 1999 results, adjusted for a few items which were clearly out of line in 1999.
Original Profit Plan for 2000
Standard Contribution

Forecasted Standard

Margin/litre
Vanilla

Forecasted litre Sales

Contribution Margin

$.4329

2,409,854

$1,043,200

Chocolate

.4535

2,009,061

911,100

Walnut

.5713

48,883

28,000

Buttercrunch

.4771

262,185

125,000

Cherry Swirl

.5153

204,774

105,500

Strawberry

.4683

628,560

294,400

Pecan Chip

.5359

157,012

84,100

Total

$.4530

5,720,329

$2,591,300

Colin Drury, Management and Cost Accounting – Boston Creamery

Breakdown of Budgeted Total Expenses
Variable Costs

Fixed

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