Westport Electric Company Essay example

979 Words Jan 24th, 2009 4 Pages
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
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Although some expenses may be justified as they ultimately translate to higher revenues for the company, it will not hurt to cut on other costs that are in truth as not value-adding as they may first seem. One of the basic tenets in business postulates that at any given time, companies must strive to maximize production while minimizing the use of its most valuable resources. Management must make periodic evaluations of its cost levels and check if these do the organization any good. Avoidable costs that cause a large dent in profits must therefore be eliminated.

Still in connection to costs, the group further suggests that management assess proposed expenditures based on whether or not these are seen to achieve overall corporate objectives or not. Quite obviously, some divisional managers may be compelled to send in budgets that will only benefit their units, but which may prove detrimental to the company at large. And since the gauge of success is mostly profit figures, there is a high probability that such expenditures, their reasonableness notwithstanding, may still be approved by top management in the end.

Furthermore, the group wishes to note that management may also look into redefining the role of the vice president for finance. In the current budgeting system, it can be recalled that the vice

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