Chapter 4

Chapter 4 is preview chapter of the book (The example is of a manufacturing company called Superior Manufacturing Company).


Review the Organizational chart on page 124
-Identify the staff and line positions
-Discuss the span of control of the VP of manufacturing
-Discuss the flow of communication


A committee was created to investigate the idea of implementing a Budgeting system.

They made the following recommendations :
1. The accounting system should be changed to a responsibility accounting system
2. A strengths and weakness analysis will be completed:

   
    Strengths:
        1. Employees
        2. Financial Strength
        3. Participative attitude of Management
    Weakness   
        1. Lack of an aggressive marketing program
        2. Quality problem (excessive returns)
        3. Lack of a social program

   
Broad Objectives of SMC
1. Motivate employees
2. Ethical environment
3. Increase sales- New products and new geography
4. Increase sales at a rate faster then the industry standards
5. Competitive pricing
6. Quality
7. Good Corporate citizen
8. Dynamic Management
   


Specific Goals
    Review figure 4.4
1. Growth Objective
2. ROI
3. Profit Margin
4. Cash Flow
5. Research
6. Efficient Factory     Production
7. Cost Control - The objective is not to cut expenses, but to create a
    favorable ratio of expenses to output (i.e.reduce waste, etc.)


Basic Strategy to reach goals
1. To increase market share
    A. R and D
    B. Promotions and total marketing improvement
    C. Quality control programs (Technology, Training)
2. To Increase production efficiency
        A. Upgrading personnel
        B. Quality control programs
        C. Training
        D. Better selection of personnel    
        E. Maintenance of machinery
3. Management development programs

Strategic and Tactical Plans
    See page 4.8
    Tactical Sales Plan
The plan has 3 distinct parts
        -Planned Volume
        -Promotional budget per unit
        -Sales expenses
       

Review Schedule 1- Page 136
    Sales Plan
Review Schedule 2- Page 137
    Production Plan
Review Schedule 3- Page 138 Direct Materials Budget
Review Schedule 4- Page 138
Direct materials purchasing        

Review Schedule 5- Page 139
Direct Labor-

Review Schedule 6 Page 139 Building services Budget

Review Schedule 7-Page 142

Review Schedule 8and9Page143
    Inventory Budget
           
Review Schedule 10- Page 145
    Distribution and promotional expenses budget
   
Review - Schedule 11
Administrative Expense Budget

Review Schedule 13 and 14
Budgeting income statement            
Review Schedule 15 Page 147
Capital Additions Budget
           
Review Schedule 16 -Page 148
    Cash Flow Budget
               
Review Schedule 17- Page 149
Budgeted Balance Sheet