Body Glove Essay

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Karlee Egger Due September 21, 2014 Course Number ACCT 461 Case Study 24-1 Body Glove Question 1) The purpose of Body Glove’s budgeting system was to project revenues and expenses for the upcoming fiscal year. A cash budget is used to monitor and detect early warning signs of problem areas. According to Ken Philip, company early warning signs fall into three areas – “financial, managerial, and other (litigations).” The financial area seems easy to track because we have the financial reports, various budgets to monitor this area. Even managerial seems easy to monitor with appropriate checks and balances because if a manager is absent continually, how can they monitor their expenses (materials, salaries, legal, etc.)? The most difficult one to monitor and estimate is other signs because litigations mostly are estimates until they finish the legal system. Question 2) “Body Glove’s budgeting process began in 1990 where the management team estimated sales growth for 1991 and the national sales manager, Kurt, projected sales per month by product. Each department was requested to develop monthly projections of key expenses (materials, salaries, legal, etc.) for the upcoming fiscal year. The President of Body Glove, Russ, consolidated, reviewed, and discussed the department projections with the department managers because some managers were estimating low figures in their forecasting; by the end of December 1990, Russ, finalized the budget. Throughout the fiscal year the budget was utilized for performance monitoring, detecting early warning signs, and re-evaluate departments target budgets and performance incentives. The key dilemmas Body Glove had in the timing of the steps in the budgeting process aren’t enough inventories, need to increase capacity, maintain flexibility of consumer demands, lack of flexibility and quality for major inventory item within U.S.

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