Boston Creamery
EXECUTIVE SUMMARY
Boston Creamery, Inc, is an ice cream company that manufactures and distributes ice cream to wholesalers and retailers. In 1973, the company had installed a new financial planning and control system that compares budgeted results against actual results and be able to highlight things that needed corrective actions or commend things that resulted in a favorable overall variance. This year, the division has a favorable operating income variance of $71,700.
Highlights:
· Jim Peterson, president of the ice cream division, asked Frank, vice-president of the Sales and Marketing of the Ice Cream Division to make a short presentation at the next management meeting commenting on the major reasons for the favorable operating income variance of $71,700
· Using the newly installed financial planning and control system, Peterson wanted to illustrate to the management group how this new software can analyze the profit variance and highlight those areas needing corrective attention as well as those deserving a pat on the back.
Results:
The main weakness of the new "profit planning and control" software is that it had many space for budgetees to slack the budget. In this case, the budgetees seemed to have a tendency of budgeting revenues somewhat lower than the best estimate amounts. As well, the forecast is so simple. Furthermore, the imprecise information that the forecast provides made the firm to set up another revised profit plan. Budget revisions should be limited only to unusual circumstances.
INTRODUCTION This case, set in an ice cream company in 1973, deals with the design and use of formal "profit planning and control" systems. This company has installed a new financial planning and control system; and the year 1973 would be the first year that figures between budgeted and actual results are compared.
Purpose
The purpose of this case analysis is to illustrate to the management group at the next management meeting how an
Boston Creamery, Inc, is an ice cream company that manufactures and distributes ice cream to wholesalers and retailers. In 1973, the company had installed a new financial planning and control system that compares budgeted results against actual results and be able to highlight things that needed corrective actions or commend things that resulted in a favorable overall variance. This year, the division has a favorable operating income variance of $71,700.
Highlights:
· Jim Peterson, president of the ice cream division, asked Frank, vice-president of the Sales and Marketing of the Ice Cream Division to make a short presentation at the next management meeting commenting on the major reasons for the favorable operating income variance of $71,700
· Using the newly installed financial planning and control system, Peterson wanted to illustrate to the management group how this new software can analyze the profit variance and highlight those areas needing corrective attention as well as those deserving a pat on the back.
Results:
The main weakness of the new "profit planning and control" software is that it had many space for budgetees to slack the budget. In this case, the budgetees seemed to have a tendency of budgeting revenues somewhat lower than the best estimate amounts. As well, the forecast is so simple. Furthermore, the imprecise information that the forecast provides made the firm to set up another revised profit plan. Budget revisions should be limited only to unusual circumstances.
INTRODUCTION This case, set in an ice cream company in 1973, deals with the design and use of formal "profit planning and control" systems. This company has installed a new financial planning and control system; and the year 1973 would be the first year that figures between budgeted and actual results are compared.
Purpose
The purpose of this case analysis is to illustrate to the management group at the next management meeting how an