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Through this case, participants will be able to:

▪ understand the different approaches to preparing operating budgets;

▪ classify the costs based on traceability to its cost centres;

▪ understand the difference in budget preparation and its analysis under different cost centres;

▪ put together the required information, identify the format and prepare major operating budgets; and

▪ evaluate operating budgets and give suggestions to the company based on budget analysis.

This case is about a manufacturing company that is going to introduce a budgeting system. It highlights the process of information collecting from key employees for budget preparation. This case also deals with various decisions to be made during the implementation of the new system such as the context of budgets, cost units and sequence of budgets.This case will help students to enhance their understanding of the operating budgets. The students will able to visualize the difficulty faced by companies to implement a new system.

This case is applicable in the courses such as Master of Business Administration, Master of Commerce or other postgraduate studies. This can also be discussed in professional courses such as Chartered Accountants, Certified Management Accountants, Company Secretaries, Institute of Cost and Works Accountants of India and Chartered Financial Analysts.

Teaching Notes are available for educators only.

CSS 1: Accounting and Finance.

Strategic management and marketing.

Executive education; postgraduate; undergraduate.

By 2004, the low-cost carrier model had just recently been introduced to Southeast Asia. Airlines under this model quickly began taking market share. Singapore's first budget carrier, Valuair, finds itself in fierce competition between two rapidly emerging competitors in the second half of 2004. Valuair needs to expand in order to remain competitive. However, for this to happen the company needs additional access to capital. The CEO, Sim Kay Wee, has begun pitching to investors that his company is a smart low-risk investment. Is Sim right, given Valuair's competitive position and the market environment in which it operates?

Students will be able to apply strategic frameworks in order to develop an understanding of Valuair's market position and use this understanding to advice investment decisions.

Teaching notes are available for educators only. Please contact your library to gain login details or e-mail support@emeraldinsight.com to request teaching notes.

The interviews were conducted with the respondents (the founder and Manager of De Cyber Hotel). Other data were obtained through the websites of the relevant businesses.

Siti Alia and her friends established De Cyber Hotel in January 2019. It was incorporated as a Malaysian private limited company in Cyberjaya, Selangor. Siti Alia was appointed as the hotel manager and was responsible for managing the hotel’s day-to-day operations and financial matters. Being a new budget hotel, competing with other established hotels was quite difficult. De Cyber Hotel used brochures and word-of-mouth for its promotion activities and mainly depended on walk-in guests. Siti Alia knew she had to take immediate action to ensure the hotel’s survival and could no longer rely on walk-in guests. Hence, to increase the occupancy and revenue rate, on 27 March 2019, De Cyber Hotel management decided to accept an offer from ABC Digital Booking to implement a digital booking mechanism and form a partnership for at least a year. ABC Digital Booking provided an online system to enable the listing and booking of budget accommodations and partnered with hotels to provide similar guest experiences across countries. After working and collaborating for 10 months with ABC Digital Booking, Siti Alia had to decide whether De Cyber Hotel should continue its alliance with ABC Digital Booking. Hence, she had to think thoroughly and consider the advantages and disadvantages, as well as the impact of her decision on the business.

Undergraduate Integrated Case Studies, Seminar in Management, Risk Management and Corporate Governance, Management Accounting, Financial Accounting, Strategic Management. Postgraduate Organizational Behaviour, Management Accounting and Controls, Strategic Management Accounting, Marketing Management, Hospitality Strategic Management, Entrepreneurship Development.

It's panic time at Blackheath Manufacturing. Profits have been declining, so the owner's son comes to the rescue to run the company. He asks a consultant to determine what's wrong. And the consultant has specific answers: The company's pricing guidelines are all wrong, there needs to be a budgeting system to reverse the downward slide in profits, and a former employee should be rehired. This case provides students with the data for constructing a production and raw-materials budget, flexible-expense budget, income statement, balance sheet, and cash budget. See also “Blackheath Manufacturing Company” (UVA-C-2197).

Public Finance

Masters level graduate studies for public and private sector managers.

The protagonist in this case is Mrs Maribeth Ocampo a manager of a reputable non-governmental organization (NGO) that plans to devise a position on the Philippines' Priority Development Assistance Fund (PDAF) (or more pejoratively called “pork barrel”). This NGO manager intends to tap the assistance of their local legislator to fund some of their projects. Her NGO has been working with farmers in provinces in the Bicol region and one of the recent projects of the group involves skills training for the female farmers, which aims to provide the latter with a greater variety of income source which they can tap during the lean season. Expenses associated with the project include costs of the training sessions (e.g. cost of session kits and honorarium of resource people) and assistance that will be provided to the female farmers to start their venture.

However, recent reports have surfaced which cast doubts on the accountability and transparency associated with the PDAF of the legislators. Some reports indicate the presence of commissions that NGOs must allegedly pay to the legislators in exchange for their access to the said funds, while a recent scam involves the creation of bogus NGOs that allegedly serve as conduits through which legislators can take advantage of their allocation. The NGO manager needs to decide on whether and to what extent to engage with legislators on tapping the pork barrel funds. She also needs to address the question: “What is the position of my NGO (and possibly all reputable NGOs more broadly) on pork barrel funds moving forward?”

This case aims to familiarize the manager with key public finance concepts such as discretion and accountability; and to develop her/his appreciation of the politics surrounding the public sector budget and, in particular, discretionary funds. The case is focused on Philippine legislators' discretionary funds, the PDAF. However, it can be used to discuss issues surrounding public finance concepts of transparency, accountability and citizens' engagement in the budget process in a much broader context within developing democracies.

The case revolves around the scandal surrounding the pork barrel funds of some legislators that were exposed for apparent abuse in early 2013. The scandal and its repercussions are still ongoing at the time of writing this case, so the authors expect to update this case moving forward. It aims to highlight an example of the role of public institutions and its respective challenges when it comes to critical decisions of keeping public financial a credible undertaking. It is also expected that this case will help develop an understanding of the pros and cons in the use of discretionary funds and help the student identify potential risks for abuse in public finance management with respect to these funds.

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

Innovative Always (IA) is a small manufacturing unit which has implemented Standard Costing. It has five departments which are headed by five partners. For cost control monthly budgets are prepared. At the end of each month, actual are compared with budgets and variances are calculated. Performance of the five partners alongwith their respective departments have to be evaluated with the help of detailed variance analysis. The case also throws up some conceptual issues like Normal Output, Interdependence of Variances and Recalculation of certain variances for assigning clear cut responsibilities to concerned departments. A comprehensive case on Budgeting and Standard Costing, it showcases the importance of Flexible Budget and Variance Analysis for cost control and performance evaluation.

Management control system, corporate performance management, budgeting, planning, multinational organization.

Graduate and executive education level management programs.

General Motors India (GMI) operations established in 1994 and grew steadily, unlike her startling global performance. In 2007, GMI unveiled its new vision and mission for aggressive growth, expansion and establishing presence across all segments. With increased globalization of General Motors Corporation (GMC), the strategic importance of GMI for sourcing was envisaged. The case describes the organization structure and management control systems at GMI and the changes onto new strategy and vision. The case narrates the unique futures of its control systems such as dual reporting and matrix organization, business plan deployment (BPD), budgeting, performance measurement and compensation system.

The financial planning and control system in a large decentralized multinational subsidiary. Typical organizational responsibility structure and administrative and functional, dual-control mechanism. Appreciate strategic planning and budgeting process and how the strategy is cascaded through multiple key result areas and the BPD board. The business environment and strategy dynamics and its relationship with the prevalent control system. Opportunity for students to speculate the changes in control system in wake of radical changes in the business and company environment. Opportunity to introduce Simmons (1995) levers of controls and management control system package.

Teaching notes.

Xyberspace Consulting, Inc. is reconsidering the allocation of the costs associated with its Training and Educational Services Group (TESG), a shared-services or support department to its user departments. Currently, the company uses a single departmental rate to allocate actual training costs to the user groups, using the user groups' actual usage of TESG resources. The company is exploring whether it should allocate TESG fixed and variable costs separately, whether it should use budgeted or actual allocation rates and whether it should allocate costs based on budgeted or actual usage. This case is intended to give students exposure to allocating shared-services or support-department costs, understanding the implications of different allocation strategies, and evaluating whether and how allocation systems can facilitate strategy implementation.

This case provides students the opportunity to practice variance analysis for an annual operating plan using flexible budgeting skills. First, a static budget is flexed to account for changes in product volume. Then, actual results are compared to the flexed budget and analyzed for product price, efficiency, and other variances. In addition, the case allows for discussion as to how flexible budgets can be used for management decision making, and how various compensation structures can affect financial results.

This case was a real-life situation faced by the author. Names were changed, so students would not know that the author was the protagonist. The case had been developed over several years as a capstone to the capital budgeting section of an MBA finance course and an advanced undergraduate course.

Trey and Lauren Gallo were considering the purchase of a vacation condo that also generated rental income. The current owners were willing to sell at a lowball offer of $605,000 as the pandemic entered its 13th month. The Gallos felt they needed to act fast to get this deal. However, the risks were extraordinary, as the pandemic had reduced rental income by 50% and borders had just recently closed. The case provides all data needed to compute rental revenues, capital expenditure, operational expenditures and financing costs. Students are expected to compute the NPV and IRR of free cashflows. Students will compute and evaluate the cost of capital using the condo’s projected debt structure, a choice of several proxy betas and a project risk premium. The case also uses extensive sensitivity analysis. This case differs from corporate capital budgeting problems because it evaluates both levered and unlevered cashflows, and the cashflows include savings from personal use. The case has been successfully used in MBA finance courses and advanced undergraduate finance courses. The case can be used as a capstone case for capital budgeting or a comprehensive exam in undergraduate, MBA and executive programs. The case questions can also be spread throughout a course to cover the topics of financial statement forecasting, free cash flows, capital budgeting, cost of capital and sensitivity analysis.

Earlier versions of this case have been used in an advanced undergraduate corporate finance course and MBA finance courses. The case is generally used as a capstone to the material on capital budgeting. Students should have already covered material on financial statements, loan cashflows, levered and unlevered cashflows, CAPM, proxy betas, weighted average cost of capital, NPV and IRR. This case is also appropriate for courses in real estate finance and personal finance.