1.
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.
ANSWER:
Budget control systems are often regarded as one of the most effective tools used in
the planning and monitoring of business operations in a company. The effectiveness of the
preparation will determine whether the business succeeds or fails. In order to maintain
oversight of the organization's financial structure, the organization must do a statistical
review of the budgeted and real estimates. The firm, on the other hand, has not been able
to flex the real figures with the budgeted figures. This issue has hampered capital planning,
putting the organization's financial management mechanism at risk.
The company has also struggled with a lack of shared interests for its workers.
Emory was led to conclude that the company's main aim was to deliver high-quality products
based on the case presented, but a closer examination of the company found that the main
goal was to keep costs down. With this form of confusion, employees do not know what the
main goal of the company is; hence, decisions aimed at reaching for the goals cannot be
made. The company's financial management structure would not inspire. The method
overlooks important considerations that must be considered when assessing results. In the
absence of these variables, evaluating employee success and devising strategies for
achieving expectations becomes inefficient. Uncontrollable variables have a major impact on
the fiscal management mechanism. Rush orders and poor upkeep have had a significant
impact on the system at the business. The corporation has been unable to manage its teams
as a result of these causes, resulting in inefficiency.
2. Explain how Ferguson & Son Manufacturing Company's budgetary control system could be
revised to improve its effectiveness.
ANSWER:
Successful planning is one of the system's changes that can be made. There is a good
probability that capital distribution will improve as a result of good planning. The
corporation would therefore have a greater chance of reconciling budgeted and real
estimates. Flexibility allows you to handle the uncertainties that are likely to arise where
there is a difference between actual figures and the budgeted figures. To have a positive
impact on the market, the company should also communicate to its staff its attainable goals.
Employees will be familiar with the company's priorities and strategies as a result of this plan
of action, and they will be able to function in line with the specified goals. Additionally,
outlining objectives of the company will help develop a system that rightfully accords
resources to their respective channels.
The business should therefore be able to devise an appropriate system that is in
accordance with the company's multiple achievable variables. All aspects should be in
regulation at all levels in order to prevent any disruptions caused by uncontrollable factors in
the company's business activities. The corporation should be able to allocate different
budgets that are time-bound that do not display significant disparities after a minor
improvement in the company's results. The company's management should therefore be
informed on the different financial processes that apply to their areas of responsibility.
Through such information, it will possible for all the individuals involved in management to
keenly monitor the performance of the company and make necessary adjustments if need
be.
Finally, the organization must develop an operational framework that realizes the
profit-generating mechanism. The completion of the process establishes a consistent basis
for the company's financial management structure. The corporation would be able to
implement an integrated structure that caters to all divisions within the organisation as a
result of these recommendations.
