Galvor Company Summary

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Register to read the introduction… Each January the Geneva headquaters of Universal set tentative objectives for the following two years for each of its European operating units. For each of over 300 Universal product lines in Europe, objectives were established for five key measures: sales, net income, total assets, total employees and capital expenditure. From January to April, these tentative objectives were negotiated between Geneva headquaters and the operating managements. During May, the negotiated objectives were reviewed and approved by Universal's European headquaters in Geneva and by corporate headquaters in the United States. In June and July, Galvor prepared its business plan. The plan aso contained in less detail for the fifth year hence.

Summary Reports
The broad scope of the business plan can best be understood by a description of the type of information it contained. It began with a brief one page financial and operating summary containing comparative data for preceding year, current year, next year, two years hence and five years hence.

Anticipated changes in net income for the current year and for each of the next two years were summarized according to their cause: volume of sales, product mix, sales prices, raw material purchase prices, cost reduction programs and accounting changes and all other
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Before final approval of a company's business plan at the Geneva review meeting, changes were often proposed by Universal's top management. The approved business plan became the foundation of the budget for the following year, which was due in Geneva by mid-November. Minor changes between the overall key results forecast in the business plan and those reflected in greater detail in the budget were not permitted. Requests for major changes had to be submitted to Geneva no later than …show more content…
The final item "controller's monthly operating and financial review contained an explanation of the significant variances from budgets.

Cost of the System
The control and reporting system including preparation of the annual business plan, imposed a heavy burden in both time and money on the management of an operating unit. The change to a formal monthly reporting system has been difficult to a realize cause due to the low level of employees training and many tasks must be fully performed by the controller and chief accountant. The number of employees in the controller's departement in subsequent years will not depend on Glavor's volume of activity, but rather on Universal's requirements.

Getting the data to Universal on time continous to be a problem because there was no necessary people who undestand the reporting system and its purpose, few people are conversant in english, different accounting methods and converted internal records. Universal decides that the entire organization must move to a certain basis by a specified date. Cost of the planning and reporting system was high especially for smaller

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