Body Glove Case

skepticism 1 For what purpose does embody Glove use its calculateing arranging? Which purposes are emphasized? The purpose of carcass Gloves budgeting system was to project expenses and forecast revenues for the upcoming financial year. The budget is apply to monitor proceeding (but non linked to transaction based incentives) and detect untimely warning signals of problem areas. The budgeting system allows the managers of all(prenominal) subdivision monitor their expenses in which budgets have been set for materials, salaries and legal expenses amongst others. inquire 2 Trace the steps in the development of the budget at personify Glove. What are the light upon events that match to the timing of the steps in the budgeting process? 1. The budgeting process of Body Glove began in November 1990. The management team estimated sales cometh for 1991 and the national sales manager, Kurt, then grim knock off these forecasts to provide the essential projected sales per mon th per product. 2. Each department was requested to developed monthly projection of key expenses such as materials, salaries, legal expenses, etc. for the upcoming fiscal year.3. Russ (president of Body Glove) consolidated, go overed, and controverted them with his managers, suggesting changes if any changes were undeniable as near managers were too optimistic with their forecasting. 4. The budget was finalized by the residue of December 1990, by Russ. 5. Throughout the fiscal year the budget was used to stop up figures were met and monitor the per lay downance of departments. It was also used to detect early warning signals of problem areas by comparing actual performance on monthly basis and re-evaluate departments not achieving their budget targets. It was not linked to performance based incentives.The key events that led to the budget being established were the event that production was scheduled based on historical and pre- book info which meant that they did not have e nough memorandum and were one month stooge getting products into stores, which had two main impacts 1) the represent of inventory stock outs was great than inventory carrying costs 2) the reputation of the system was impacted. The budgeting process meant that managers based their forecasts on a wider scope of information rather than just pre book sales.Question 3 The case says that Body Glove never prepared a budget prior to fiscal year 1991. How can a guild like Body Glove function effectively without a budget, or can it? Body Glove had a great product with the neoprene wetsuits and had gained probative market share through its niche fun life course image which challenged competitors. The business had a small but loyal client base, and had attained no.2 market share. Whilst the business had significant growth, I dont believe it ran completely effectively.An extract from the case state mentions they lost $1 million in sales due to a shortage of inventory and its forecasts on future sales were not accurate. Anthony, Hawkins & Merchant (2008, p.740) assert If the total costs in a responsibility budget are anticipate to vary with volume, as is the case in most standard cost centres, the responsibility budget whitethorn be in the form of a variable budget. Such a budget shows the planned carriage of costs at various volume levels. If the company was able to pause understand its costs, and forecasts for growth it could have made the necessary investments in upgrading the manufacturing operations to meet the demand. Body Gloves reputation was at carry and in 1990 the company decided to break away from employing family only which may have been a sign that they needed some fresh eye to drive growth.Question 4 What changes to Body Gloves budgeting and review process would you recommend, if any?* Body Glove needs to undertake some major strategic planning to ascertain company key objectives and ensure that the budget reflects these plans. * Managers should n ot be the final people to establish the key figures relating to the budget, this should be done separately based on information provided by previous years data (a board or a dodge department should be in charge of this) to eliminate bias in forecasts* The president needs to ensure that the goals of the organisation are communicated clearly throughout the company and how each department directly relates to these goals. Calling a come across with personnel from each department may be important in communicating this information. * Each individual should relate to the budget. For example, the sales forecasts are open upon the work of the sales team and therefore should be a inducement for them to perform. Achieving outcomes should relate to performance incentives, this holds managers also.Question 5 If Body Glove continues to grow and, perhaps, diversifies, what changes will have to be made to the budgeting and review process? strategical budgeting is imperative in any organisation . Leland (2003) asserts The behavior or capabilities of the large and colonial organisation cannot be fully comprehended by analyzing its individual parts. Because of its complexity, the organisation or system, displays emergent behaviors arising from the relationships among those parts.Strategic budgeting is about comprehending the whole organisation in order to understand emergent behaviors. It requires a top down approach, not a bottom up approach and at the present the budget system is not really valued by the organisation. The budget system can be easily modified, managers (whose forecasts will be biased) are mise en scene numbers and the outcomes of the budget are not linked to organisational performance which would forego any manager to wonder what the disincentive is not to meet the results.A long range plan should be established so that Body Glove can start some long range clump planning, they should also look at a Strategic Human resourcefulness approach whereby they incorporate these long term goals into the behaviors and performance of staff.How do these outcomes relate to an organisation that you are familiar with? Whilst at GSK, each year in February the company would commence the working year with a sales group where all sales staff would meet and the opening day would include a confabulation by the managing director on the goals of the organisation. The MD would talk about previous year performance, what worked and what didnt work so wellspring and key learnings.We were then told of the total operational budget and this was broken down into sales for our various products. As sales teams, our managers would then discuss with us which Key performance indicators we would be measured by, which was a melt of sales results and behaviors. Throughout the year, our direct managers would often re-communicate the budget to us and we would buzz off a monthly break down of targets and results.