Eiger Manufacturing manufactures circuit boards for computer-controlled appliances for the home. The sales have been very volatile sometimes stressing the plant's capacity and sometimes depressingly slow. During a recent slow period Nathan Jones a production supervisor complained to Janet Smith accounting manager about the flexible budget.
"I try as hard as I can to meet the budget" he says "and then I find out that just meeting the budget's not good enough. Last month when we sold 8000 units I was $10000 under my budget and then you all blow me out of the water with your report that I actually was $5000 over because sales were slow. I thought this responsibility accounting business was supposed to mean we are held accountable just for things we can control. How do we control sales? At the beginning of the year you gave us all targets. Mine says that for an average month of 10000 unit sales I should spend about $82000. I spend less and get an unfavorable budget report. What gives?"
Required:
Write a short memo to respond to Mr. Jones.

Question

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The Answer of Eiger Manufacturing manufactures circuit boards for computer-controlled appliances for the home. The sales have been very volatile sometimes stressing the plant's capacity and sometimes depressingly slow. During a recent slow period Nathan Jones a production supervisor complained to Janet Smith accounting manager about the flexible budget.
"I try as hard as I can to meet the budget" he says "and then I find out that just meeting the budget's not good enough. Last month when we sold 8000 units I was $10000 under my budget and then you all blow me out of the water with your report that I actually was $5000 over because sales were slow. I thought this responsibility accounting business was supposed to mean we are held accountable just for things we can control. How do we control sales? At the beginning of the year you gave us all targets. Mine says that for an average month of 10000 unit sales I should spend about $82000. I spend less and get an unfavorable budget report. What gives?"
Required:
Write a short memo to respond to Mr. Jones.

Eiger Manufacturing Manufactures Circuit Boards for Computer-Controlled Appliances for the Home