Barney and Co.

BARNEY AND CO. 6

Barneyand Co.

BarneyandCo.

Inthewakeof decreasein salesplus acquisitionof newequipment,Barney andCo. needsto reanalyze its` masterbudget.Hereis thecomprehensiveforecastof howmanagementexpectsto manageeveryaspectof thebusinessin a fiscalyear.Allmanagersare to cometo thepresentfinancialhealthstatusof theCompany wheretheexpenditurehas surpassedtheinflow of revenue.Therefore,a strategyis neededto increasesaleswhilemaintainingordecreasingcost.Thestaticbudgetwill increaseby 5% forthefiscalyearbecauseof loanrepayment.Consequently, eachdepartmentmust adhere to thebudgeted moneyallocation. In theoperatingbudget,overheadexpenseswill be relooked at to seewheretheir duplication orunnecessaryexpensesoccurred.

Inthecaseof Barney andCo., theproductionlinewill be auditedto increaseefficiencyas thenewequipmentis meantto cutcostswhilemaintainingquality.Thereductionof workersin thelinewill reducecostsandthetimeof makingtheproductwill bereducedsoproductionwill increase.Themarketingbudget,which is a subset of theoperatingbudget,will be rationalized,as whatworkswill bemaintained.Advertisementswill beutilizedformorethan spaceads.Thereportingperiodis to bereducedfrom bimonthly to biweekly.Cashflowbudgetwill showshortfalls between expensesandsalesandat timeslike thesetheproductioncycleandinventorylevel istightened.Therefore,theproductsdonot takemuchspaceandtimein thewarehouse.

The2014 budgetdevelopmentwill belinkedto thecorporate strategywheremanagersandemployeeswill havea vividunderstandingof thesetstrategicgoals.Theobjectivesaresetbefore budgeting commencessothatthebudgetdevelopers findsiteasier.Thebudgeting planfor2014 is a budgetthat supportsstrategicobjectivesfrom thestart,therefore,requiresfewrevisions.Theplanmust havedesignproceduresthat allocateresourcesstrategically. There must be a clear,coordinated reviewingof operatingandcapitalbudgetssothatmanagershaveinsightinto thewaysalterationin one budgetaffectstheother.Theseandmanysuchmeasures,andmakinguseof cross-functional teamsto inspectactionplansresultsin selectingappropriatestrategiesthat producedesiredoutcome.In 2014, budgetplanincentiveswill be peggedon performancemeasuresotherthan meetingbudgettargets.Precisecostinformationis crucialto budgeting. Therefore,costmanagementeffortsare linkedto budgeting. Thiswill providereadyaccessto costinformationto improveboth thepreciseness andspeedof thebudgetprocess.

Thecostcontrolsystemin theCompany will bestandardized.Abetterwayto usevarianceanalysiswill beincorporatedin thebudgetplan.Theprogramwill streamline budgetproceduresto collectbudgetinformation,makedesignationdecisionsandcommunicatefinaltargetson timeat decreasedcostandwith littledisruptionto theCompany`s coreactivities.Budgetcomplexity andcycletimewill bereducedas well.Thebudgetplanwill caterforchangeBarney andCo. ought to respondto competitivethreatsoropportunities.Thecaseof thedecreasesalesis a threatthat allocation in termsof financeandhumanresourceto themarketingdepartmentisincreased.Thesituationcan betakenas an opportunityto developnewtactics to meettargets.Thebudgetplanfor2014 will includean accommodationof change.

Inthefive stepsplancalled,theplanningcycleBarney andCo. by buyingtheequipmentis clearitis partof theCompany long-term goal.Thesecondstageshowsthefinancialimplicationof theequipmentin reducedemployeesincreasedqualityalsoincreasedefficiencyin production.Thethirdstepis theprovisionforunforeseenchangesin thefiscalyear.Forecastsorinformalprojectionsaremadein termsof production,storageandsalesthroughout theyear.Theequipmentadditionwill enabletheCompany to producea businessplan,which can be usedto applyforventurecapital.

References

BiermanJr, H., &amp Smidt, S. (2012). Thecapital budgeting decision: economic analysis of investment projects.Routledge.