MBA Management Accounting Student Assignment: Case study of Lanier Corporation

(a) As Weygandt, Kimmel and Kieso (2010) defined a budget is a formal written statement of management’s plans for a specified future time period, expressed in financial terms, which requires an adequate schedule for obtaining the related information as well as making decision. In another word, there is a call for a high standard and appropriate process of budgeting. In Lanier Corporation we can find that the budgeting process is rather like a formal one which involves several management of different department. In addition, there may be two major problems involved in the budgeting making process on the basis of the information obtained from this case, which may result in the failure of this company to achieve the president’s sales and profit target.

To begin with, the beginning of planning process of the budgeting making does lack the involvement of the financial staff. As the case mentioned, the president of finance only engages in the budgeting process when there is a halt that the production department may not have the adequate consideration on the location of the financial resources. Such kind of inadequacy becomes one of the causes contributing to the failure of the achievement on the sales and profit targets. For the one hand, it is time consuming when making a stop and re-involve the financial staff to revise the budgeting process, which may lead to an incomplete budgeting plan. For the other hand, the budgeting making process may easily be misguided even though the financial staff engages in the decision making because she may lack the overall view of the whole budgeting making process as the person who came later, whose suggestions and views may be not so suitable and compressive to be as the key resource in moving the halt occurring in the process.

Secondly, according to the Nonprofits Assistance Fund (2006), thorough communication is required among the management level when making budgeting plan, while for Lanier Corporation it is a problem. Communication should be firstly consider among each management staff, while in the case there may be a lack of a thorough communication both horizontally and vertically among the management level. For instance, the formulation process of the sales budget and the cost of marketing activities by the marketing manager were more seemed like a department activity rather than a whole cooperation activity. And moreover, the boss of each department is seemed to work separately at first and then get together to revise their plans, which may not proper enough on the basis of the suggestions from Weygandt, Kimmel and Kieso (2010) as well as the Nonprofits Assistance Fund (2006). Such situation has several drawbacks. Firstly, the individual work first and then group work may not only waste time and resources but also result in the one sidedness and inharmoniousness of the budgeting plan. Meanwhile, some compromises made by management staff only to achieve the target setting by the president may arouse some backfire such as the conflicts among the management staff, improper implementation of the budgeting plans and other related political behaviors. This point may lead to the failure to fulfill the sales and profit target of Lanier Corporation as well.

(b) Based on the suggestions from Weygandt, Kimmel and Kieso (2010), the Nonprofits Assistance Fund (2006) as well as Welch (2005), there are several recommendations worth mentioning for Lanier to correct the problems in budgeting process.

First of all, Lanier is advised to revise this process where people of management level and president share goals that is to say that depending on the budgeting process, Lanier could meet every possible growth chances and point out the real obstacles and make out a plan to reach the sky as well.

Meanwhile, to assist the first suggestion, it is necessary for Lanier to foster an effective communication environment among the staff of the management level. For instance, in terms of aspect on goal setting in total dollars sales and net income before taxes for the next year, involving of all the management staff including the president, marketing managers, executive vice president, production manager, factory manager, and the president of finance become so crucial for the success of the budgeting process, which is helpful in the improvement of information and commitment of the budgeting plan.

Furthermore, to make sure the programmatic objectives of budgeting plans are integrated with the corporate mission and strategic plan. The final budget is then suggested to be reviewed by all the staff involved in the budgeting process, particular the finance staff, which can facilitate Lanier to make sure the proper implementation of the budget plan especially when managers are all engaged in the development of the budget plan, they may more satisfied with the allocations of resources.

The last but also important issue is the process of implementation and management. In this step, Lanier should take the changes into consideration. It is recommended to revise and update its budget when changes occur depending on the importance of the changes especially during the period of some natural disasters and economic downturn.

Broadly speaking, every aspect of the budgeting process is important for the success of achieving the sales and profit targets, which can’t be ignored at any circumstance.

(c)

According to the current situation of Lanier Corporation, it is necessary to cut the costs of the functional areas such as the production area, marketing area, financial area, personal management area and so on ( Amandeep2010).

Generally speaking, all the functional areas are responsible to assist Lanier to achieve its business targets on the amount of the total dollar sales and net profit. Even though there may be some compromises made by functional areas, they should also stand in the same boat aimed at the fulfillment of that target. (Amandeep 2010)

First of all, the marketing efficiency has a great influence on the sales performance. For instance, Lanier can cut cost in the marketing areas from saving, such as e-mail customers on its product information instead of mailing the printed coupon or newsletters, which can save the cost of not only printing but also delivery. And it is also reasonable to market online such as some free and effective ways of online marketing including blog, directory-marketing, press release, email-marketing and so on, but not spend too much buying ads from traditional newspapers or magazines during the information era, which could also help Lanier save a lot. The above ways may not only reach Lanier’s customers quickly and directly but also save cost, which is reasonable.

With reference to the production area, the cost cutting is also reasonable when the sales drop. For instance, during the economy recession period, faced with the shrink of market demand, Lanier could cut some cost in the production process such as resorting to the outsource method to save the cost of purchase new machines and their maintenance fees. Meanwhile, it may be also necessary for the production area of Lanier to reduce its production amount as well as the inventory amount in order to save production cost as well as the inventory maintenance fee.

Moreover, personnel department is also expected to cut the cost to facilitate Lanier to come out of the dilemma of sales volume falls. For example, to put off some training and development a program depending on the current situation is a good choice, for which often requires the investment of a certain amount of money and other related resources.

By and large, with the support of cost cutting in several functional areas, Lanier could use the saved money to boost sales or even avoid the further loss besides the impact of the sales decline.

Reference

Amandeep 2010, Functional Areas of Management, Journal of Management,

Australian Securities & Investments Commission (ASIC) 2008, Receivership: a guide for creditors, asic.gov.au, viewed 26 March 2011, <http://www.asic.gov.au/asic/pdflib.nsf/lookupbyfilename/receivership_guide_for_creditors.pdf/$file/receivership_guide_for_creditors.pdf>

Griffin, R.W. & Pustay, M.W. 2010, International Business, 6th edn, Pearson, New Jersey,

ICAEW 2011, Alternative to Bank Finance, icaew.com, viewed 27 March 2011,

<http://www.icaew.com/en/library/subject-gateways/business- management/ business-finance-and-grants/sources-of-finance/small-business-update/alternatives-to-bank-finance>

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