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Assignment
2—Manufacturing Budget Analysis
Tom Emory and Jim
Morris strolled back to their plant from the administrative offices of Ferguson
& Son Manufacturing Company. Tom is manager of the machine shop in the
company’s factory; Jim is manager of the equipment maintenance department.
The men had just
attended the monthly performance evaluation meeting for plant department heads.
These meetings had been held on the third Tuesday of each month since Robert
Ferguson, Jr., the president’s son, had become plant manager a year earlier.
As they were
walking, Tom Emory spoke: “Boy, I hate those meetings! I never know whether my
department’s accounting reports will show good or bad performance. I’m
beginning to expect the worst. If the accountants say I saved the company a
dollar, I’m called ‘Sir,’ but if I spend even a little too much—boy, do I get
in trouble. I don’t know if I can hold on until I retire.”
Tom had just been
given the worst evaluation he had ever received in his long career with Ferguson
& Son. He was the most respected of the experienced machinists in the
company. He had been with the company for many years and was promoted to
supervisor of the machine shop when the company expanded and moved to its
present location. The president (Robert Ferguson, Sr.) had often stated that
the company’s success was due to the high-quality work of machinists like Tom.
As supervisor, Tom stressed the importance of craftsmanship and told his
workers that he wanted no sloppy work coming from his department.
When Robert
Ferguson, Jr., became the plant manager, he directed that monthly performance
comparisons be made between actual and budgeted costs for each department. The
departmental budgets were intended to encourage the supervisors to reduce
inefficiencies and to seek cost reduction opportunities. The company controller
was instructed to have his staff “tighten” the budget slightly whenever a
department attained its budget in a given month; this was done to reinforce the
plant manager’s desire to reduce costs. The young plant manager often stressed
the importance of continued progress toward attaining the budget; he also made
it known that he kept a file of these performance reports for future reference
when he succeeded his father.
Tom Emory’s
conversation with Jim Morris continued as follows:
Emory: I really
don’t understand. We’ve worked so hard to meet the budget, and the minute we do
so they tighten it on us. We can’t work any faster and still maintain quality.
I think my men are ready to quit trying. Besides, those reports don’t tell the
whole story. We always seem to be interrupting the big jobs for all those small
rush orders. All that setup and machine adjustment time is killing us. And
quite frankly, Jim, you were no help. When our hydraulic press broke down last
month, your people were nowhere to be found. We had to take it apart ourselves
and got stuck with all that idle time.
Morris: I’m sorry
about that, Tom, but you know my department has had trouble making budget, too.
We were running well behind at the time of that problem, and if we had spent a
day on that old machine, we would never have made it up. Instead, we made the
scheduled inspections of the forklift trucks because we knew we could do those
in less than the budgeted time.
Emory: Well, Jim,
at least you have some options. I’m locked into what the scheduling department
assigns to me and you know they’re being harassed by sales for those special
orders. Incidentally, why didn’t your report show all the supplies you guys
wasted last month when you were working in Bill’s department?
Morris: We’re not
out of the woods on that deal yet. We charged the maximum we could to other
work and haven’t even reported some of it yet.
Emory: Well, I’m
glad you have a way of getting out of the pressure. The accountants seem to
know everything that’s happening in my department, sometimes even before I do.
I thought all that budget and accounting stuff was supposed to help, but it
just gets me into trouble. It’s all a big pain. I’m trying to put out quality work;
they’re trying to save pennies.
Review the case.
Respond to the following:

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. (approximately 1 page)
Explain how
Ferguson & Son Manufacturing Company’s budgetary control system could be
revised to improve its effectiveness. (approximately 1–2 pages)
Explain how the
use of an activity-based costing system could change the results of the budget,
if utilized. (approximately 1 page)
As stated in the
case, many employees have “quit trying” and have altered behavior on the job.
Provide specific ways for how you would use a budget to change employee
behavior and align goals in the organization. Explain how goal alignment can
improve profitability and overall return to the shareholders of the company.
(approximately 1 page)
Synthesize data
to explain the concept of ROI and describe how the use of an activity-based
costing system can improve the company’s ROI and the potential impact on free
cash flow. (approximately 1 page)
Write a 5–6-page
report in Word format. Apply APA standards to citation of sources. Use the
following file naming convention: LastnameFirstInitial_M5_A2.doc.

By the due date
assigned, deliver your assignment to the Submissions Area

Assignment 2
Grading CriteriaMaximum Points

Identified the
problems that appear to exist in the company’s budgetary control system and
explained how the problems are likely to reduce the effectiveness of the
system.

64

Explained how the
company’s budgetary control system could be revised to improve its
effectiveness.

64

Explained how the
use of an activity-based costing system could change the results of the budget
if utilized.

44

Identified ways
of how one can use a budget to change employee behavior and align goals in the
organization and explained how goal alignment can improve profitability and
overall return to shareholders of the company.

44

Synthesized data
to explain the concept of ROI, how the use of an activity-based costing system
can improve the company’s ROI, and the potential impact on free cash flow.

56

Wrote in a clear,
concise, and organized manner; demonstrated ethical scholarship in accurate
representation and attribution of sources; and displayed accurate spelling,
grammar, and punctuation.

28Total:300

Assignment
2—Manufacturing Budget Analysis
Tom Emory and Jim
Morris strolled back to their plant from the administrative offices of Ferguson
& Son Manufacturing Company. Tom is manager of the machine shop in the
company’s factory; Jim is manager of the equipment maintenance department.
The men had just
attended the monthly performance evaluation meeting for plant department heads.
These meetings had been held on the third Tuesday of each month since Robert
Ferguson, Jr., the president’s son, had become plant manager a year earlier.
As they were
walking, Tom Emory spoke: “Boy, I hate those meetings! I never know whether my
department’s accounting reports will show good or bad performance. I’m
beginning to expect the worst. If the accountants say I saved the company a
dollar, I’m called ‘Sir,’ but if I spend even a little too much—boy, do I get
in trouble. I don’t know if I can hold on until I retire.”
Tom had just been
given the worst evaluation he had ever received in his long career with Ferguson
& Son. He was the most respected of the experienced machinists in the
company. He had been with the company for many years and was promoted to
supervisor of the machine shop when the company expanded and moved to its
present location. The president (Robert Ferguson, Sr.) had often stated that
the company’s success was due to the high-quality work of machinists like Tom.
As supervisor, Tom stressed the importance of craftsmanship and told his
workers that he wanted no sloppy work coming from his department.
When Robert
Ferguson, Jr., became the plant manager, he directed that monthly performance
comparisons be made between actual and budgeted costs for each department. The
departmental budgets were intended to encourage the supervisors to reduce
inefficiencies and to seek cost reduction opportunities. The company controller
was instructed to have his staff “tighten” the budget slightly whenever a
department attained its budget in a given month; this was done to reinforce the
plant manager’s desire to reduce costs. The young plant manager often stressed
the importance of continued progress toward attaining the budget; he also made
it known that he kept a file of these performance reports for future reference
when he succeeded his father.
Tom Emory’s
conversation with Jim Morris continued as follows:
Emory: I really
don’t understand. We’ve worked so hard to meet the budget, and the minute we do
so they tighten it on us. We can’t work any faster and still maintain quality.
I think my men are ready to quit trying. Besides, those reports don’t tell the
whole story. We always seem to be interrupting the big jobs for all those small
rush orders. All that setup and machine adjustment time is killing us. And
quite frankly, Jim, you were no help. When our hydraulic press broke down last
month, your people were nowhere to be found. We had to take it apart ourselves
and got stuck with all that idle time.
Morris: I’m sorry
about that, Tom, but you know my department has had trouble making budget, too.
We were running well behind at the time of that problem, and if we had spent a
day on that old machine, we would never have made it up. Instead, we made the
scheduled inspections of the forklift trucks because we knew we could do those
in less than the budgeted time.
Emory: Well, Jim,
at least you have some options. I’m locked into what the scheduling department
assigns to me and you know they’re being harassed by sales for those special
orders. Incidentally, why didn’t your report show all the supplies you guys
wasted last month when you were working in Bill’s department?
Morris: We’re not
out of the woods on that deal yet. We charged the maximum we could to other
work and haven’t even reported some of it yet.
Emory: Well, I’m
glad you have a way of getting out of the pressure. The accountants seem to
know everything that’s happening in my department, sometimes even before I do.
I thought all that budget and accounting stuff was supposed to help, but it
just gets me into trouble. It’s all a big pain. I’m trying to put out quality work;
they’re trying to save pennies.
Review the case.
Respond to the following:

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. (approximately 1 page)
Explain how
Ferguson & Son Manufacturing Company’s budgetary control system could be
revised to improve its effectiveness. (approximately 1–2 pages)
Explain how the
use of an activity-based costing system could change the results of the budget,
if utilized. (approximately 1 page)
As stated in the
case, many employees have “quit trying” and have altered behavior on the job.
Provide specific ways for how you would use a budget to change employee
behavior and align goals in the organization. Explain how goal alignment can
improve profitability and overall return to the shareholders of the company.
(approximately 1 page)
Synthesize data
to explain the concept of ROI and describe how the use of an activity-based
costing system can improve the company’s ROI and the potential impact on free
cash flow. (approximately 1 page)
Write a 5–6-page
report in Word format. Apply APA standards to citation of sources. Use the
following file naming convention: LastnameFirstInitial_M5_A2.doc.

By the due date
assigned, deliver your assignment to the Submissions Area

Assignment 2
Grading CriteriaMaximum Points

Identified the
problems that appear to exist in the company’s budgetary control system and
explained how the problems are likely to reduce the effectiveness of the
system.

64

Explained how the
company’s budgetary control system could be revised to improve its
effectiveness.

64

Explained how the
use of an activity-based costing system could change the results of the budget
if utilized.

44

Identified ways
of how one can use a budget to change employee behavior and align goals in the
organization and explained how goal alignment can improve profitability and
overall return to shareholders of the company.

44

Synthesized data
to explain the concept of ROI, how the use of an activity-based costing system
can improve the company’s ROI, and the potential impact on free cash flow.

56

Wrote in a clear,
concise, and organized manner; demonstrated ethical scholarship in accurate
representation and attribution of sources; and displayed accurate spelling,
grammar, and punctuation.

28Total:300

Assignment
2—Manufacturing Budget Analysis
Tom Emory and Jim
Morris strolled back to their plant from the administrative offices of Ferguson
& Son Manufacturing Company. Tom is manager of the machine shop in the
company’s factory; Jim is manager of the equipment maintenance department.
The men had just
attended the monthly performance evaluation meeting for plant department heads.
These meetings had been held on the third Tuesday of each month since Robert
Ferguson, Jr., the president’s son, had become plant manager a year earlier.
As they were
walking, Tom Emory spoke: “Boy, I hate those meetings! I never know whether my
department’s accounting reports will show good or bad performance. I’m
beginning to expect the worst. If the accountants say I saved the company a
dollar, I’m called ‘Sir,’ but if I spend even a little too much—boy, do I get
in trouble. I don’t know if I can hold on until I retire.”
Tom had just been
given the worst evaluation he had ever received in his long career with Ferguson
& Son. He was the most respected of the experienced machinists in the
company. He had been with the company for many years and was promoted to
supervisor of the machine shop when the company expanded and moved to its
present location. The president (Robert Ferguson, Sr.) had often stated that
the company’s success was due to the high-quality work of machinists like Tom.
As supervisor, Tom stressed the importance of craftsmanship and told his
workers that he wanted no sloppy work coming from his department.
When Robert
Ferguson, Jr., became the plant manager, he directed that monthly performance
comparisons be made between actual and budgeted costs for each department. The
departmental budgets were intended to encourage the supervisors to reduce
inefficiencies and to seek cost reduction opportunities. The company controller
was instructed to have his staff “tighten” the budget slightly whenever a
department attained its budget in a given month; this was done to reinforce the
plant manager’s desire to reduce costs. The young plant manager often stressed
the importance of continued progress toward attaining the budget; he also made
it known that he kept a file of these performance reports for future reference
when he succeeded his father.
Tom Emory’s
conversation with Jim Morris continued as follows:
Emory: I really
don’t understand. We’ve worked so hard to meet the budget, and the minute we do
so they tighten it on us. We can’t work any faster and still maintain quality.
I think my men are ready to quit trying. Besides, those reports don’t tell the
whole story. We always seem to be interrupting the big jobs for all those small
rush orders. All that setup and machine adjustment time is killing us. And
quite frankly, Jim, you were no help. When our hydraulic press broke down last
month, your people were nowhere to be found. We had to take it apart ourselves
and got stuck with all that idle time.
Morris: I’m sorry
about that, Tom, but you know my department has had trouble making budget, too.
We were running well behind at the time of that problem, and if we had spent a
day on that old machine, we would never have made it up. Instead, we made the
scheduled inspections of the forklift trucks because we knew we could do those
in less than the budgeted time.
Emory: Well, Jim,
at least you have some options. I’m locked into what the scheduling department
assigns to me and you know they’re being harassed by sales for those special
orders. Incidentally, why didn’t your report show all the supplies you guys
wasted last month when you were working in Bill’s department?
Morris: We’re not
out of the woods on that deal yet. We charged the maximum we could to other
work and haven’t even reported some of it yet.
Emory: Well, I’m
glad you have a way of getting out of the pressure. The accountants seem to
know everything that’s happening in my department, sometimes even before I do.
I thought all that budget and accounting stuff was supposed to help, but it
just gets me into trouble. It’s all a big pain. I’m trying to put out quality work;
they’re trying to save pennies.
Review the case.
Respond to the following:

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. (approximately 1 page)
Explain how
Ferguson & Son Manufacturing Company’s budgetary control system could be
revised to improve its effectiveness. (approximately 1–2 pages)
Explain how the
use of an activity-based costing system could change the results of the budget,
if utilized. (approximately 1 page)
As stated in the
case, many employees have “quit trying” and have altered behavior on the job.
Provide specific ways for how you would use a budget to change employee
behavior and align goals in the organization. Explain how goal alignment can
improve profitability and overall return to the shareholders of the company.
(approximately 1 page)
Synthesize data
to explain the concept of ROI and describe how the use of an activity-based
costing system can improve the company’s ROI and the potential impact on free
cash flow. (approximately 1 page)
Write a 5–6-page
report in Word format. Apply APA standards to citation of sources. Use the
following file naming convention: LastnameFirstInitial_M5_A2.doc.

By the due date
assigned, deliver your assignment to the Submissions Area

Assignment 2
Grading CriteriaMaximum Points

Identified the
problems that appear to exist in the company’s budgetary control system and
explained how the problems are likely to reduce the effectiveness of the
system.

64

Explained how the
company’s budgetary control system could be revised to improve its
effectiveness.

64

Explained how the
use of an activity-based costing system could change the results of the budget
if utilized.

44

Identified ways
of how one can use a budget to change employee behavior and align goals in the
organization and explained how goal alignment can improve profitability and
overall return to shareholders of the company.

44

Synthesized data
to explain the concept of ROI, how the use of an activity-based costing system
can improve the company’s ROI, and the potential impact on free cash flow.

56

Wrote in a clear,
concise, and organized manner; demonstrated ethical scholarship in accurate
representation and attribution of sources; and displayed accurate spelling,
grammar, and punctuation.

28Total:300

Assignment
2—Manufacturing Budget Analysis
Tom Emory and Jim
Morris strolled back to their plant from the administrative offices of Ferguson
& Son Manufacturing Company. Tom is manager of the machine shop in the
company’s factory; Jim is manager of the equipment maintenance department.
The men had just
attended the monthly performance evaluation meeting for plant department heads.
These meetings had been held on the third Tuesday of each month since Robert
Ferguson, Jr., the president’s son, had become plant manager a year earlier.
As they were
walking, Tom Emory spoke: “Boy, I hate those meetings! I never know whether my
department’s accounting reports will show good or bad performance. I’m
beginning to expect the worst. If the accountants say I saved the company a
dollar, I’m called ‘Sir,’ but if I spend even a little too much—boy, do I get
in trouble. I don’t know if I can hold on until I retire.”
Tom had just been
given the worst evaluation he had ever received in his long career with Ferguson
& Son. He was the most respected of the experienced machinists in the
company. He had been with the company for many years and was promoted to
supervisor of the machine shop when the company expanded and moved to its
present location. The president (Robert Ferguson, Sr.) had often stated that
the company’s success was due to the high-quality work of machinists like Tom.
As supervisor, Tom stressed the importance of craftsmanship and told his
workers that he wanted no sloppy work coming from his department.
When Robert
Ferguson, Jr., became the plant manager, he directed that monthly performance
comparisons be made between actual and budgeted costs for each department. The
departmental budgets were intended to encourage the supervisors to reduce
inefficiencies and to seek cost reduction opportunities. The company controller
was instructed to have his staff “tighten” the budget slightly whenever a
department attained its budget in a given month; this was done to reinforce the
plant manager’s desire to reduce costs. The young plant manager often stressed
the importance of continued progress toward attaining the budget; he also made
it known that he kept a file of these performance reports for future reference
when he succeeded his father.
Tom Emory’s
conversation with Jim Morris continued as follows:
Emory: I really
don’t understand. We’ve worked so hard to meet the budget, and the minute we do
so they tighten it on us. We can’t work any faster and still maintain quality.
I think my men are ready to quit trying. Besides, those reports don’t tell the
whole story. We always seem to be interrupting the big jobs for all those small
rush orders. All that setup and machine adjustment time is killing us. And
quite frankly, Jim, you were no help. When our hydraulic press broke down last
month, your people were nowhere to be found. We had to take it apart ourselves
and got stuck with all that idle time.
Morris: I’m sorry
about that, Tom, but you know my department has had trouble making budget, too.
We were running well behind at the time of that problem, and if we had spent a
day on that old machine, we would never have made it up. Instead, we made the
scheduled inspections of the forklift trucks because we knew we could do those
in less than the budgeted time.
Emory: Well, Jim,
at least you have some options. I’m locked into what the scheduling department
assigns to me and you know they’re being harassed by sales for those special
orders. Incidentally, why didn’t your report show all the supplies you guys
wasted last month when you were working in Bill’s department?
Morris: We’re not
out of the woods on that deal yet. We charged the maximum we could to other
work and haven’t even reported some of it yet.
Emory: Well, I’m
glad you have a way of getting out of the pressure. The accountants seem to
know everything that’s happening in my department, sometimes even before I do.
I thought all that budget and accounting stuff was supposed to help, but it
just gets me into trouble. It’s all a big pain. I’m trying to put out quality work;
they’re trying to save pennies.
Review the case.
Respond to the following:





































































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. (approximately 1 page)
Explain how
Ferguson & Son Manufacturing Company’s budgetary control system could be
revised to improve its effectiveness. (approximately 1–2 pages)
Explain how the
use of an activity-based costing system could change the results of the budget,
if utilized. (approximately 1 page)
As stated in the
case, many employees have “quit trying” and have altered behavior on the job.
Provide specific ways for how you would use a budget to change employee
behavior and align goals in the organization. Explain how goal alignment can
improve profitability and overall return to the shareholders of the company.
(approximately 1 page)
Synthesize data
to explain the concept of ROI and describe how the use of an activity-based
costing system can improve the company’s ROI and the potential impact on free
cash flow. (approximately 1 page)
Write a 5–6-page
report in Word format. Apply APA standards to citation of sources. Use the
following file naming convention: LastnameFirstInitial_M5_A2.doc.























By the due date
assigned, deliver your assignment to the Submissions Area


Assignment 2
Grading CriteriaMaximum Points


Identified the
problems that appear to exist in the company’s budgetary control system and
explained how the problems are likely to reduce the effectiveness of the
system.




64

Explained how the
company’s budgetary control system could be revised to improve its
effectiveness.



64

Explained how the
use of an activity-based costing system could change the results of the budget
if utilized.



44

Identified ways
of how one can use a budget to change employee behavior and align goals in the
organization and explained how goal alignment can improve profitability and
overall return to shareholders of the company.




44

Synthesized data
to explain the concept of ROI, how the use of an activity-based costing system
can improve the company’s ROI, and the potential impact on free cash flow.



56

Wrote in a clear,
concise, and organized manner; demonstrated ethical scholarship in accurate
representation and attribution of sources; and displayed accurate spelling,
grammar, and punctuation.




28Total:300

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