Case Scenario: Budget Culture and Behavior:
Bob Haskins is the purchasing manger for regal products . Each year Regal products develops, a master budget Bob is responsible for the preparing a purchasing budget, which he bases on budgeted level of production .Bob carefully plans purchasing cost and raw material inventory levels tp meet production needs.
Each year, Yvonne Lang ,president of Regal products, conduct performance ,evaluation ,and bonuses area paid to key employees, including Bob, based on meeting budget results. For the Past two years, Bob had received a small bonus and as been chided by Yvonne for poor planning, specifically , Yvonne has pointed put the purchasing department has not maintained. adequate levels of raw material inventory as is always in a rush to obtain adequate levels of raw material inventory and is always in a rush to obtain material, resulting in increased shipping and handling charges. must often pay premium amounts for immediately shipment of materials. In her most recent evaluation ,Yvonne stated to Bob The sales department and production department are doing a excellent Job. They consistently exceed their budget by 10% or more. I just don't understand why you can't meet your numbers, perhaps it is time to for some changes around here?.
After getting childed by Yvonne Bob went back and look at his budget, He knew he had ordered the amount by the budget. The budget for January and February is as follows.
January February
Unit sales 300,000 350,000
Add desired ending inventory 35,000 25,000
Subtotal 335,000 375,000
less budget inventory 30,000 35,000
Budgeted production 305,000 340,000
Pounds of Raw material per unit 1.1 1.1
Required pounds of raw material 335,000 374,000
Add Desired ending inventory of raw 37,000 27,5Y00
Less beginning inventory of raw material 33,550 37,400
Total of Raw Material need ( pounds) 339,350 364,100
Required to do:
A. If less sales were 10% higher than budgeted, how many pounds of raw material would Bob need to rush orders each month so he can meet demand and the required ending inventory as shown in the budget.
B. Why does it aappears the the purchasing department is having trouble meeting it budget
C. It is appropriate to blame BOB for all of the purchasing problems?
D. IF Yvonne does make some changes, what changes would you suggest she consider?