=+9. The Mammoth Manufacturing Company had introduced a budgetary control system in J anuary 1982. In October 1982 senior managers were reviewing the past nine month's results before beginning work on the 1983 budget, and the following conversation ensued:

Accountant: Our results look very disappointing; we have missed our budget estimates in every one of the past nine months.

Revenues have been less than expected and costs have exceeded budget estimates, so our profit is way below budget.

Production Manager: That's right, but our results aren't that bad.

In fact, they're slightly better than the same period in 1981. Considering the economic situation, we've done quite weIl to hold costs at these levels.

Marketing Manager: The sales force have performed exceptionally weIl, too. Our best man has beaten his quota target six months out of nine; that's rare even in good times.

Accountant: That's as may be, butneither of you have met your original budget estimates. I use those figures to plan our capital requirements. In March, I negotiated a loan to cover our estimated operating requirements over the summer because of the sales growth you forecast. In fact we didn't need the money because the growth was much smaller than budgeted. The result is that we have paid high interest rates to raise unused capital.

Marketing Manager: But you can't expect salesmen to meet their quotas every month. I set those quotas to be ademanding target, to motivate the people out on the road to aim high. The average salesman meets his quota maybe one month in three; if it was lower he just would not work as hard.

Production Manager: It's the same in the factory. My output and cost standards are based on a week in which everything goes right, and that happens only once a month. Most weeks something goes wrong and we don't achieve our target. But the target is important; it shows what can be done if only we can get everything right.

Accountant: That may be all right for you people, but I can't work like that. What would our bankers say if I promised to repay a loan in June, but found that I couldn't and had to delay until August? You can't run a business on hopes; the budget must be an accurate es ti mate of what is expected to happen, not a daydream of what might happen if all went weIl.

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