rajan and John Shank This case requires the analysis of budgeted versus actual performance for di erent organisational functions and considers strategic versus operational issues. David Jones, president and principal shareholder of Instrumental Ltd, sat at his desk reflecting on the 2018 results (Exhibit 302.1). For the second year in succession the company had exceeded its profit target. David was obviously happy with the year’s results. All the same, he wanted to get a better feel for the relative contributions of the R&D, manufacturing and marketing departments in this overall success. With this in mind, he called his assistant, Jennifer, a recent MBA graduate of the London Business School, into his office. ‘Jennifer,’ he started, ‘as you can see from our recent financial results, we h
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Instrumental Ltd
Vijay Govindarajan and John Shank
This case requires the analysis of budgeted versus actual performance for di erent organisational functions and considers strategic versus operational issues.
David Jones, president and principal shareholder of Instrumental Ltd, sat at his desk reflecting on the 2018 results (Exhibit 302.1). For the second year in succession the company had exceeded its profit target. David was obviously happy with the year’s results. All the same, he wanted to get a better feel for the relative contributions of the R&D, manufacturing and marketing departments in this overall success. With this in mind, he called his assistant, Jennifer, a recent MBA graduate of the London Business School, into his office. ‘Jennifer,’ he started, ‘as you can see from our recent financial results, we have exceeded our profit target by £622 000. Could you please prepare an analysis showing how much R&D, manufacturing and marketing contributed to this?’
Exhibit 302.1
Jennifer, flushed with all the fervour and enthusiasm of a total convert to professional management,got down to work immediately. She collected all the data in Exhibit 302.2 and then wondered somewhat disconsolately what her next step should be.
Exhibit 302.2 Instrumental Ltd: additional information Attach Below
Instrumental’s products can be grouped into two main lines of business: electric motors (EM) and electronic instruments (EI). Both EM and EI are industrial measuring instruments and perform almost identical functions. However, EM is based on mechanical and electrical technology, whereas EI is based on the microchip. Instrumental Ltd uses a variable costing system for internal reporting purposes.
QUESTION
You are required to put yourself in Jennifer’s position and state what you would do in your analysis of Instrumental’s performance across its different departments and what you would recommend to the president.
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