Case 8-22

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Group 11: Nguyen Thi Thu Huyen
Nguyen Thi Dieu Linh
Mai Ngoc Tam
Nguyen Lan Anh
Case 8-22: Evaluating a company’s budget procedures
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. Ferguson & Son Manufacturing Company has appointed Robert Ferguson, Jr., the son of the president as the plant manager. He directed the company’s focus on budgetary control system. The prime aims of the system were reducing inefficiencies and seeking cost reductions. However, the results extracted from the conversation of Tom Emory – manager of the machine shop in the company’s factory and Jim Morris – manager of the equipment maintenance department shown the contrary consequences. Emory pointed out that every time they attained the budget the accounting department tightened it slightly. It means that the workers were required to perform tasks at a faster speed but still hold the quality!!! Further, the scheduling department being harassed by sales for special orders assigned too much things for machine shop. Of all, this was nothing more like unrealistic targets. All things were the same – equipments, number of machinists, while others were variable such as amount of rush orders, the requirement for each orders. It seems that the budget was a burden rather than a target. This could be seriously seen in various aspects of the issue. First, work efficiency had gradually reduced at an alarming level. Due to time limit, the period of machine setup and adjustment the frequency of which had been increasing parallel with the number of orders made the machinists annoyed and threatened to break the budget. Though, in fact, this step of process should be paid more attention as it decided all the following steps and even the quality of the products. What’s more, the coordination among departments in the company was less united as each just...
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