Boston Creamery Case

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Date: October 4, 2010 To: Mr. Jim Peterson, President, Boston Creamery, Inc., Ice Cream Division Subject: Presentation of 1973 Results to Management Committee Introduction and Executive Summary Boston Creamery, Inc. has recently implemented a new financial planning and control system to assist in better managing the budget and planning process for the organization. A four-step profit planning process was assembled to guide the management team in the planning process for 1973. After the books were closed at the end of 1973, full financial results are available from the new system for the first time. The system allows the comparison of budgeted figures to actual results. Frank Roberts, Vice-president for Sales and Marketing has been asked to make a brief presentation on the major variance reasons behind the favorable operating income variance. The purpose behind the presentation would be to identify areas that need attention including celebrating the favorable variance items to identification of variances that need to be addressed to working throughout the year in creating a flex budget based on known changes in unit sales, sales mix and costs. At first glance, Frank seems very elated with the results which certainly validate his Sales and Marketing management acumen. However, upon further analysis excellence from the Sales and Marketing departments may not reflect the full story of what is happening in the Ice Cream market in Boston in 1973. At odds are Frank Roberts and the Vice President for Manufacturing and Operations, John Parker. Mr. Parker believes that his Operations group is being painted in a negative light and would like the variance analysis to provide a bit more detail than Frank is showing in his initial draft presentation. After detailed analysis, it would appear that there are many favorable and unfavorable variance items in both the

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