Review the following sources of learning and on behalf of the reading, respond to the following case scenario:
1) Budgeting and cost management techniques in manufacturing firms
2) Budgeting and Financial planning: Retail and service firms
3) The master budget and cost behavior patterns
Buns Bakery: Creating and Using a Master Budget:
The objective is to gain an in-depth knowledge of budgeting by developing and using a multi-product, multi-period master budget. The case consists of two segments. The first segment is the master budget we created in class. The second segment will give you the opportunity to use the budgets to make recommendations for improving company performance. The use of multiple products and the introduction of incentives to improve company performance add a degree of complexity. Working on this type of case provides you with a greater understanding of both the flexibility of a master budget and the information such a budget can provide to decision makers. In addition, the case illustrates the incentives for budget padding, providing an opportunity for us to discuss the ethics of budgeting and potential consequences.
Please read Part II of the case carefully. Using the master budget youcreated for Part I of the project, answer the following questions:
1. What will Buns’ EPS, cash flow from operations, and profit margin be for each of the options?
2. If Buns can only make one of the proposed changes, which change do you recommend the company make? Explain.
3. If Buns can make two of the proposed changes, which two do you recommend the company make? Explain.
4. Provide two additional changes Buns could make to improve its pro forma financial statements.
5. If you were the venture capitalist, would you invest in Bun’s Bakery after seeing the original numbers? What about after the changes had been made in question 2? In question 3?
As you answer questions 2 and 3, please keep in mind that I will be grading based on your effort and thought rather than on your specific answers. Feel free to use other ratios and important numbers to justify your decisions. Remember that the goal is to convince me to accept your proposed decision.
Question will be graded for creativity and effort. I am not looking for a specific answer. I suspect that many of you will come up with ideas that I have not yet thought of, so I’m excited to see what you come up with. The only thing that I will not accept is a minor revision of a change we discussed in class or that is given in the reading. Your proposal should have some specific numbers (i.e., how you expect the assumptions to go up or down). In coming up with numbers, try to make them fit in with the rest of the case.
Also, keep in mind that it is almost impossible to get something for nothing. In other words, it is hard to envision a scenario that improves sales or income without costing Buns Bakery something. The four changes proposed in the case are good examples of these tradeoffs.
Attachment:- Buns bakery case.rar