Sound Dynamics, Inc.(Mcs Case)

Budget management analysis is used by mangers as a tool and helps determine that all resources available are being used efficiently. The budgets are determined yearly and are based upon the previous year’s budget and variances. This paper will discuss specific strategies to manage budgets within forecast, compare five to seven expense results with budget expectations, describe possible reasons for variances, give strategies to keep results aligned with expectations, recommend three benchmarking techniques, and identify those that might improve budget accuracy, and justify the choices made.

5. General and Administrative expenses decreased by $250,000 as a result of lower-than-planned raises for employees.

7. Note 9, on page 216, states that Harnischfeger decreased R&D expense in 1984 relative to the previous two years.  Do you think this change was motivated by business considerations or accounting considerations?  How did this change affect the company’s reported profits in 1984?

12. If 12,500 units are produced, what is the total amount of manufacturing overhead cost incurred to support this level of production? What is the total amount expressed on a per unit basis?

1) Prepare the manufacturing staff’s calculations for the three alternatives (please refer to the attachments):

Describe the budget process and how staff members at the unit level impact the budget.

To maintain the excellent services and infrastructure enjoyed by the City of Urbanopolis, it is vital to ensure that the budget meets the demands of these services and infrastructure. Since most of the budget is tied up within labor payments, this should be the first focus of restructuring in terms of budget. It is therefore important to find a way to better balance the budget so that vital equipment and infrastructure requirements can be met. The request for new computer equipment, for example, has been denied, and the department is obliged to work with second-hand and/or outdated equipment. This, in turn, affects the way in which the department is able to function, which is not effective or acceptable in the long run. Several positions have been identified for elimination in the new financial year. However, my policy for restructuring human resources budgets is to match the skills and enthusiasm for each job description with the potential elimination of the position. Hence, my policy will be to change the description and statuses of some positions to maintain employees who have shown themselves to be worthy of their positions while either negotiating with or eliminating the positions of those employees who have not.

Note 9 indicates that Harnischfeger decreased its R&D expense considerably in 1984 relative to the previous two years. Do you think this change was motivated by business considerations or accounting considerations? How did this change affect the company’s reported profits in 1984?

18. Within the same budget performance report, it is impossible to have both favorable and unfavorable variances.

e. From the 1989 budget (exhibit 2), how much overhead cost do you think was actually saved by outsourcing muffler-exhaust systems and oil pans?

Peter’s Peripherals assembles multimedia upgrade kits --- sets of components for adding sound and video to desktop computers. The demand for their kits for the next four quarters is estimated in the table below. Unit manufacturing cost for each kit is $160. Holding costs on each kit is $80 per quarter. Any kit that must be delivered late is assessed a backorder cost of $120. Each worker is capable of finishing 10 kits per quarter. If the company chooses to vary work force levels, it will incur costs of $400 for each additional worker; $600 for each termination. The company currently has 28 employees.

2) Introduction of computerization into the planning and budgeting process and introduction of “e-disclosure” to employees.

Total annual purchases were approximately $250, and about $60 million to be sourced through Materials Department

* Large facility – production capacity is 1 million units/year, spent $250 million on R&D.

The unemployment level is at an all-time low. The economy is strong. The stock market is breaking new records. Investors are buying stocks by the handful. Corporations are making extremely