Ferguson & Son Manufacturing Company's budgetary control system
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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. (approximately 1 page)
Explain how Ferguson & Son Manufacturing Company's budgetary control system could be revised to improve its effectiveness. (approximately 1-2 pages)
Explain how the use of an activity-based costing system could change the results of the budget, if utilized. (approximately 1 page)
As stated in the case, many employees have "quit trying" and have altered behavior on the job. Provide specific ways for how you would use a budget to change employee behavior and align goals in the organization. Explain how goal alignment can improve profitability and overall return to the shareholders of the company. (approximately 1 page)
Synthesize data to explain the concept of ROI and describe how the use of an activity-based costing system can improve the company's ROI and the potential impact on free cash flow. (approximately 1 page)
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The response addresses the query posted in 1469 words with APA References
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The response addresses the query posted in 1469 words with APA References
//For a business organization, it is essential to make the best possible use of the budget and other resources to make their efficient usage. In this regard, budgetary control systems are directed to help organizations to find out the way to overcome different performance related issue. In this regard, the presented part of the paper is directed to reflect basic problems faced by the Ferguson & Son Manufacturing Company and its budgetary control system. This section will also highlight the measures adopted by the company to improve the effectiveness of the budgetary control system.//
Answer 1: The budgetary control system exists in an organization for planning and controlling purposes and the same is required to be adequately designed to meet the objectives of an organization (Sharma & Kumar, 2000). The budgetary control system essentially requires comprising the characteristics such as proper coordination, planning, control, and follow-up. The study of Ferguson & Son Manufacturing Company's budgetary control system reveals the following problems, along with explanations of how these problems are likely to reduce the effectiveness:
Coordination: To meet the budgeted expectations, a strong coordination between the departments of the company is essential. It is observed from the talks of Emory and Morris that the present budgetary control system of Ferguson & Son Manufacturing Company is suffering from coordination problems. This is evident from the fact that when Emory's department's hydraulic press broke down, the people of maintenance department (under Moris's control) did not do their work on time. This laid the Emory's department to do it by themselves and resulted into unnecessary idle time due to which department cost was increased.
Rigidity: Company's controller has been instructed to keep the budget in check and reset the budget targets to further reduce the cost as soon as a department attained its budget in a given month. This practice seems to have attained rigidity as is evident from the frustration of both, Emory and Morris. This may induce to produce the inferior quality product and thereby, adversely affect the results of operations.
Proper Record Keeping: This is a must to compare the actual targets with the budgeted targets. As far as Morris's department is concerned, ...
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- BBA, University of Rajasthan
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