Case Study Boston Creamery

1112 Words 5 Pages
Register to read the introduction… Roberts’ report stated a favorable variance of $71,700 coming mainly from sales …show more content…
One of the corrective actions I would take for 1974 based on the profit variance analysis would be to emphasize the importance of forecasting an accurate budget. There seems to be conflict between the divisional managers and that should be addressed. Each person should want to provide the most useful results and not just the results that are the “least technical”. It would also be important to make sure that each division head knows what their responsibilities are in the budget analysis. The areas that deserve commendation in 1973 are obviously the favorable variances that occurred from within the variable costs of Flavors and Additives. For example, the largest part of the operational variance that he accounted for was due to the milk and sugar price variances. Is this an area where the company can control costs or it is out of their control? By showing the sales mix variance for each product you can get an even more depth look at the price variances based on mix and where sales forces should be focusing their attention (see below). The ice cream mix that had the highest standard contribution margin also has the lowest number of gallons. By pushing more advertising expenses towards this product they could improve profits. | Standard Contribution Margin | Original Plan | Revised Plan @ Actual Volume | …show more content…
The main weakness in this approach to management is that it could lead to ethical issues. As seen in the case there is tension between Roberts and Parker. Parker sees Roberts as just trying to make his division look better. It needs to be made clear by upper management that teamwork is in is in the best interest of the organization as a whole. It seems that both Roberts and Parker might have only been concerned about their respective divisions. By providing incentives for each division to accurately forecast their budgets they can reduce revised budget plans and increase efficiency. By having management look at budgeted costs and revenues for actual volume and not projected volume it can reduce large surprises in ending results. This type of system can work if the appropriate steps are taken to ensure efficiency and

Related Documents