Westport Electric Corporation
Case Context In a meeting, James King, the supervisor of administrative staff budget section of Westport Electric Company, a large manufacturer and seller of electric and electronic products, was discussing his displeasure with the proposed increase in budget of the offices. According to him, these are not justified and are clear indications of faults in the company’s budgeting system. The company currently has six staff offices like those mentioned and they are tasked with providing advice to top management and operating divisions as well as other staff offices. They also coordinated among the divisions depending on their areas of activity. These staff offices are budgeted using the …show more content…
The final decision rests in the hands of the president and the executive vice president, and finance rarely offers any dissenting opinion. Although it can be argued that these matters merit the close attention of and should ultimately be decided on by top management, the group suggests the empowerment of the vice president for finance, for the sole reason that his staff has probably the greatest amount of coordination to do insofar as the company’s operating divisions are concerned. As such, the head of the finance staff is in a better position to make truthful recommendations or offer noncompliant opinions as he/she works closer with each of the operating divisions for the most part. Moreover, financial issues should be the primary concern of the vice president for finance, as he is after all, being evaluated based on how successfully the financial resources of the company are being managed to achieve its purposes. The budgeting system, may therefore be designed as follows:
1) After each administrative staff completes its proposed budget for the year, requests should first be handed to the budgeting department, which should be tasked to examine the schedules turned in by the managers. Along with the corporate controller and the vice president for finance, the heads of each operating division must be called in to discuss their budgets with King and Kelly. The internal auditor may also be asked to join these discussions to
Click here to unlock this and over one million essaysGet Access
The purpose of this paper is to describe the budget process, variances and the major reasons of the variance to make all the financial decisions of the firm properly. This paper would also be helpful to explain that “make” or “Buy” decisions also play a significant role to improve the efficiency of the firm. In addition, the paper would also be useful to clarify that non-financial performance measure may be unsafe for the image of the firm.
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.
The budget process is a powerful planning tool for government to make important resource decisions. According the Carney and Schoenfeld‘s article on How to read a Budget, an operating budget is a reflection of government’s financial plans. When a budget is
This research paper is a brief discussion of budget management analysis. Budgeting is the key to financial management, and is the key to translates an organization goals or plan into money. Budgeting is a rough estimate of how much a company will need to get their work done, and provides the basis for evaluating performance, a source of motivation, coordinating business activities, a tool for management communication and instructions to employees. Without a budget an organization would be like a driver, driving blinded without instructions or any sense of direction, that’s how important a budget is to every organization and individual likewise (Clark, 2005).
Describe the budget process and how staff members at the unit level impact the budget.
Budgets should not be a managers task only. The whole organization should be involved in the budgeting process.
Budgeting systems turn managers’ perspectives forward and by looking to the future and planning, managers are able to anticipate and correct potential problems before they arise (Horngren, Foster & Datar, 2000). Through budgeting, management can plan ahead and maintain enough cash to pay creditors, to have adequate raw materials to meet production requirements, and to have sufficient finished goods to meet expected sales (Kieso, 2002).
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
Budgets serve five main purposes; planning, facilitating communication and coordination, allocating resources, controlling profits and operations and evaluating performance and providing incentives. The budgeting process requires both technical and interpersonal leadership skills to achieve each of these purposes effectively. The director’s memo demonstrates several short comings in the budgeting process. The director instituted the “responsibility accounting system” as a means of evaluating performance. However, the DPW director has not consulted Sam in the budget process. Sam understands that his total expenditures are impacted by relatively unpredictable events that contribute to an uncontrollable element of his cost. The
Budget formulation and use are tools that guide many decision making strategies in business. The measures that are least effective could create an avalanche of catastrophic events that can negatively impact the decision making strategies. It is in the best interest of the pertinent parties to draft an operating budget based on a collective set of information relating to organizational vision and mission. Ineffective measures can be catastrophic based on the foundation for measures used in creating the budget. Among the many issues organizations face that relates to creating an effective operating budget results from poor
Budgeting is crucial in the well-being of a company especially the financial health status of a company. In fact, no professionally managed firm would fail to budget, since the budget establishes what is authorized, how to plan for purchasing contracts and hiring, and indicates how much financing is needed to support planned activity. It is routine for a company to budget for its expenses. Expense budgets act as a guideline of how much revenue a company would require keeping the activities running. It is used to set the company’s targets for a certain period.
The 20’s century saw the use of budget involve due to a change in the environment. Indeed the control of output used to be obtained by the dissemination of tasks and so traditional budgets were very much highlighted, with a significant top-down influence. As an example of the importance of budget in the 1970’s IBM had about 3,000 people involved in their budgetary process. During the same period, the oil crisis brought concerns about rising in costs and led to the introduction of zero-based budgeting (ZBB), which can lower cost by avoiding blanket increases or decreases to a prior period’s budget. The increase in business uncertainties was in discrepancy with the stifling effect of fixed plans, promoting the use of rolling budgets. The 1990’s saw the growing influence of shareholders and steered the focus on a budget that included a wider view of organisation results, answering the investment community for quarterly updates on results and expectations (Bill Ryan, 2005). Budgets then started being used as a communication tool between the financial community and the organisation, allowing the corporation to be integrated in the capital market. Moreover companies started using flexible budgets rather than static budgets as nowadays various levels of activities can be observed in most organisations. The use of flexible budgets then enables firms to be consistent with their new environment and the market.
5. The success of budgetary control depends upon the support of the top management. If there is lack of support from top management, then this will
This project seeks to bring out the budgeting and budgetary control practices of UT financial institution, Koforidua, and how they can make sure their budgeting practices are done in such a way as to incur minimal or less cost for the organization