1. Discuss the validity and reasonableness of Scamp’s sale projections.

2. Prepare production, purchasing, and cash budgets for Scamp for the first six months of 2011.

3. Discuss the advantages and disadvantages of the budgets you have prepared. Who in the company does the budget help and whom, potentially, does it hurt? Does the budget help or hurt the sales department? What about production and finance? How are the various functional areas affected and why?

4. Andy Baxter, newly hired by Scamp from a competitor, suggests preparing the production budget assuming stable production. Prepare a second and third set of production, purchasing, and cash budgets. Hold production at a constant 3,000 trailers per month for the second set of budgets, and 3,500 trailers for the month for the third set of budgets.

5. Discuss the advantages and disadvantages of the second and third sets of production, purchasing, and cash budgets you have prepared. Who within the company do these budgets help and whom, potentially do they hurt? Do these budgets help or hurt the sales department? What about production and finance? How are the various functional areas affected, and why?

6. What metric should Scamp use to measure the performance of each manager in this case? What bonus system would you suggest that incorporates these measures and also encourages the managers to work as a team?