BUSINESS ECONOMICS CASE STUDY

Topics: Budget, Management, Budgets Pages: 5 (927 words) Published: March 8, 2015
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Case Study
In the case study provided, Westport Electric Company seems to be having serious budgetary problems. The selection, planning and implementation of various projects seem to be faulty. In this particular case, King who is the supervisor of the administrative staff budget staff section has raised a red alarm with regard to two recent budget approvals (Kieso 161). Background Information: Origin and Magnitude of the Problem

The operating activities of Westport Electric Company are categorized in four main groups: “the electrical and transmission group, the Military and Space group, the Home Appliances group, and the Electronics group” (Kieso 161). These groups have various operational divisions. These administrative offices vary in nature and categories. The administrative offices offer top management advice in area of specialty. The vice presidents of these departments constitute the policy committee which takes part in the in decision making. These administrative offices “offer advice to operating divisions and other staff offices and coordinating among divisions” (Kieso 161). Generally, before a project is approved it undergoes a series of checkpoints. “At the beginning of the year, the budgeting department provides timetables and instructions required for the preparation, submission and approval of budgets for the forthcoming year” (Kieso 162). During budget preparation, a number of elements are considered. They include the proposed budget, the previous budget, and the expected costs. The function of the budgeting department prescribes and analyzes the schedules submitted. During the analysis of the proposed budget for the construction of two administrative offices, the budgeting department analyzed all the presented facts and it was satisfied with them. Some of the facts checked include the accuracy of increases owing to economic dynamics and the relevance of the suggested activities. Normally, the budgeting department is supposed to agree with the financial information given. However, in this case the budgeting department failed to follow the budget approval protocol. King was extremely disturbed with the recklessness of the budgeting department. James King also realized that the step taken by the budgeting department to approve the budget for the proposed two administrative staff offices is a representation of a larger picture of the laxity in the budgeting department. James King is worried because he thinks that the budgeting department seems to have approved other projects without following proper procedures. Way Forward

Establishing objectives is an essential prerequisite of the planning process. In all organizations, employees must have a good understanding of what the organization is trying to achieve. Strategic or long term planning therefore begins with the specifications of the objectives towards which future operations should be directed. The attainment of objectives should be measurable and ideally people should be motivated by them. Once the objectives have been defined, it is paramount to identify a possible course of action that might lead to the realization of the company’s objectives. This involves understanding the company’s current strategic situation. The corporate strategy literature advocates that, prior to developing strategies, it is necessary to undertake a strategic analysis to become better informed about the organizations present strategic position (Collier 34). This involves understanding the company’s present position, strengths, weaknesses, and opportunities and risks. Having undertaken a strategic analysis, the next stage is to identify alternative strategies. The identification of the strategies should be guided by the following principles: the generic strategy to be pursued and the alternative directions in which the organization may wish to develop (Crosson 34). An organization should determine the basis on which it will sustain a superior...

Cited: Collier, Paul. Risk and Management Accounting. Connecticut: Elsevier, 2005.Print.
Crosson, Susan. Managerial Accounting. New York: Cengage Learning, 2010. Print.
Drury, Colin. Management Accounting For Business. New York: Cengage Learning, 2005. Print.
Kieso, Allan. Intermediate Accounting. New York: Wiley Plus, 2005. Print.
Needles, Belverd. Financial and Managerial Accounting. New York: Cengage Learning, 2006. Print.
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