Westport Electric Company
CASE TWO:
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 company’s budget approval procedure, which according to some of its officers like King, needs a lot of improvement.
PROBLEM STATEMENT The budgeting system of Westport should be assessed as to its efficiency and effectiveness and identify changes that will develop the current system.
ANALYSIS AND RECOMMENDATION
Among other things, the group recommends that top management actually pay considerable attention to the efficiency and effectiveness of each business division. Currently, it appears that focus is given simply on bottom line numbers; that is, each unit’s financial success is assessed solely on the basis of how handsome the profits brought in for the company, without being given much performance evaluation as is needed in any organization. Being distinct profit centers, both revenues and costs must be calculated for each business segment. It is important to note that while the individual divisions may report the most exorbitant of profit figures, the numbers do not carry with them as much meaning as when these are put into context. As in the case of Westport Electric for instance, Kelly is quick to point out that the company is certain to do better trimming down budgets handed to certain divisions.
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 company’s budget approval procedure, which according to some of its officers like King, needs a lot of improvement.
PROBLEM STATEMENT The budgeting system of Westport should be assessed as to its efficiency and effectiveness and identify changes that will develop the current system.
ANALYSIS AND RECOMMENDATION
Among other things, the group recommends that top management actually pay considerable attention to the efficiency and effectiveness of each business division. Currently, it appears that focus is given simply on bottom line numbers; that is, each unit’s financial success is assessed solely on the basis of how handsome the profits brought in for the company, without being given much performance evaluation as is needed in any organization. Being distinct profit centers, both revenues and costs must be calculated for each business segment. It is important to note that while the individual divisions may report the most exorbitant of profit figures, the numbers do not carry with them as much meaning as when these are put into context. As in the case of Westport Electric for instance, Kelly is quick to point out that the company is certain to do better trimming down budgets handed to certain divisions.