student should keep the following simplifications in mind while
working on this case:
Work in process inventories will be ignore d.
Financial and IRS tax will be the same.
Some projections for 2006 will be given.
Standards used for the 2006 budget will be the reasonably
obtainable standards.
No hourly worker will work overtime.
All price changes will occur on January 1st a nd will remain in
effect for the entire year.
The actual 2005 information is available while preparing the 2006
budget.
All debt transactions will occur either on January 1st or December
31st.
There are no bad debts.
The student should also keep in mind that the budgeting process is not
an exact science; therefore, approximate figures provide adequate
information for the decision maker. Figures should be rounded to the
whole dollar throughout the budgeting process and the control
applications. Since it is not possible to have a partial machine or
person, certain figures will always have to be rounded up.
GENERAL COMPANY INFORMATION
Fantastic, Inc. is a paint manufacturing company that produces two
qualities of paint, Super and Stupendous. The company was
established eight years ago and began with only one type of paint.
Sales of the original product have been rather stable in the past 5
years. In 2003, a second, higher quality paint was introduced, and
sales of this product have increased each year due to reasonably
effective sales efforts. The president is currently concerned about the
potential inefficient use of capacity and the effect that this has on
profits.