Jennifer has been working on next year’s budgets for some of the
division’s products. Ron quickly reviewed the work of her and then called her.
Enter his office.
Ron: “Jennifer, the budgets look pretty good, except that your
estimates of materials costs seem too low.”
Jennifer: “I checked with production and engineering people, and
They told me that they expected material costs to drop. They say they do.
Try some different methods that are nearly certain to decrease your risk.
materials waste and damage significantly.”
Ron: “It’s too soon to know how much materials costs will drop,
Or even lower. You can redo your budget.
Material costs for the current year are similar to what they were in previous years. Then if
Next year’s materials cost will be less, so the division is expected to beat last year.
Look good and budget. You might be eligible for some great bonuses in the future
Jennifer: “Using the current materials quantities puts slack
into the budget for next year.”
Ron: “Most managers try to get some slack into budgets. There’s
There is nothing wrong with this. These new methods are not yet in place.
experimental, they haven’t been reported to corporate headquarters.
It’s a great opportunity to save money. I know that’s
What the controller of divisions expects. Revisions
to me as soon as you can.”
Are you in agreement with Ron’s statements and his auguments Your own
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