Browse over 20 million
homework answers & study documents

Norton Company, a manufacturer of infant furniture and carriages

Rating

Showing Page:
1/3
Norton Company, a manufacturer of infant furniture and carriages, is in the initial stages
of preparing the annual budget for next year. Scott Ford has recently joined Norton's
accounting staff and is interested to learn as much as possible about the company's
budgeting process. During a recent lunch with Marge Atkins, sales manager, and Pete
Granger, production manager. Ford initiated the conversation below. Read the
conversation and answer the questions that follow.
Ford: Since I'm new around here and am going to be involved with the preparation of the
annual budget, I'd be interested to learn how the two of you estimate sales and production
numbers.
Atkins: We start out very methodically by looking at recent history, discussing what we
know about current accounts, potential customers, and the general state of consumer
spending. Then, we add that usual dose of intuition to come up with the best forecast we
can.
Granger: I usually take the sales projections as the basis for my projections. Of course, we
have to make an estimate of what this year's ending inventories will be, which is sometimes
difficult.
Ford: Why does that present a problem? There must have been an estimate of ending
inventories in the budget for the current year.
Granger: Those numbers aren't always reliable because Marge makes some adjustments to
the sales numbers before passing them on to me.
Ford: What kind of adjustments?
Atkins: Well, we don't want to fall short of the sales projections so we generally give
ourselves a little breathing room by lowering the initial sales projection anywhere from 5%
to 10%.
Granger: So, you can see why this year's budget is not a very reliable starting point. We
always have to adjust the projected production rates as the year progresses and, of course,
this changes the ending inventory estimates. By the way, we make similar adjustments to
expenses by adding at least 10% to the estimates; I think everyone around here does the
same thing.
Marge Atkins and Pete Granger have described the use of what is sometimes called
budgetary slack.

Sign up to view the full document!

lock_open Sign Up

Sign up to view the full document!

lock_open Sign Up

Sign up to view the full document!

lock_open Sign Up

Anonymous
Had to paraphrase some of the content but overall, really useful material.

Anonymous
Just what I needed… fantastic!

Anonymous
Use Studypool every time I am stuck with an assignment I need guidance.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4