The Oriole Furniture Inc. (Case Study) Case Study

The Oriole Furniture Inc. ( ) - Case Study ExampleThe sales and production activities of on the whole the three lines are managed by Mr. Mente. Each divisions vice president prepares an annual receipts plan, in which the result of estimation for the year has been a profit of $22.7m and the sales vividness is $77m. Mr. Menson, the companys president, has not been satisfied with the submitted profit plan. He wants a profit of $23.9m on a sales volume of $81m. When the actual work of the division is compared with the budget, Mr. Mente finds that sales remain at 11% below plan and profit is 18% below plan. The challenge before the company is that the division failed to meet the budgeted requirement during the year, and the company may consider action in midyear to ensure it reaches its budget by year-end. What does Mr. Mente need to do? What is he proposing to do about his situation? Mr. Mente should revise the plan to reach up to the new sales budget. He should try to figure out th e reason for the difference in actual performance with the budgeted performance through a complete analysis of the situation. The reasons he go forth explain to his top manager for not attaining the expected performance are the tough economic situation and old machineries besides the difficulty in finding good furniture designers. To achieve the companys profit objectives, Mr. Mente has planned to delay the purchase of some new machinery which costs $500,000 and to forego hiring two new furniture designers. But it is better to replace the old machinery that bust down frequently and led to over time labor, which will decrease the labor efficiency and delayed delivery schedules. This investment, in fact, is an as garb for the company and will speed up the production process. He should drop the idea of hiring new furniture designers so that he can save $100,000 in salary expenses. He can give training and counseling to improve the existing workers performance. What are budgets suppos ed to do and what must Mr. Mente do in the next seven months to (probably) lapse his job? Budget is a process of planning the use of resources over a definite period of time. It should motivate individuals to achieve performance levels agreed to and set forth for a better control and coordination of activities, the company may prepare budgets for each and every activity which, in turn, helps in reducing production costs. Mr. Mente has to detect the reason for the variance in actual performance and budgeted performance. Knowing how much is being spent each month will enable him to consider whether push action needs to be taken to spend in future. This process is only worthwhile if the budget is realistic. Analyzing variances against an unrealistic budget is pointless. However, in a well-run physical composition the comparison between actual costs and budget is used as the means for attaining the set goal. The difference between budget assumptions and actual outcome is the descri be issue that Mr. Mente faces. He can use variance analysis techniques to solve the issue. Mr. Mente has to start his work from the bottom line. He needs to motivate the personnel and pronounce their performance. The company also needs to invest in better equipment to increase productivity without increasing the cost towards hiring more people. The company also anticipates an increase in price of the raw material up to 6%. So Mr. Mente should ask the factory personnel