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Boston Creamery

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Boston Creamery Case Solution
MBA 611
Ryan Grady
In 1973, after the installation of a new financial planning and control system at Boston Creamery, the ice cream division showed a favorable operating income variance of $71,700. In developing the profit plan for 1973, division president (and resident moron) Jim Peterson made the first of a series of inexcusable errors in budgeting surrounding the mythical “favorable” condition. He simply used expected results for the preceding year (as obtained in Oct. 1972), giving no consideration to factors like inflation, market growth, and the fact that sales goals should be expected to increase annually in a successful company. Peterson asked Frank Roberts, inept and underhanded VP of sales and marketing, to identify the cause for this seemingly wonderful news at the next management meeting. Roberts has also been instructed to point out the areas deserving of praise and those in need of reform.
The report generated by Roberts is as follows.
|Roberts' Variance Schedule | |
|Favorable Variance Due to Sales | |
| |Volume | |$117,700 | |
| |Price | |$12,000 |$129,700 |
|Unfavorable Variance Due to Operations | |
| |Manufacturing |($99,000.00) | |
| |Delivery | |$54,000.00 | |
| |Advertising |($29,000.00) | |
| |Selling | |$6,000.00 | |
| |Administration...

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