Kieran had just attended the monthly performance evaluation meeting for plant department heads. Discussing with a colleague Keiran says: Wow, I hate those meetings! I never know where departments accounting reports will show good or bad performance. I'm beginning to expect the worst. If the accountant says I saved the company a pound I'm called Sir, but if I spend a little too much - boy, do I get in trouble. I don't know if I can hold on until I retire. Although he is one of the most respected and experienced machinists, Keiran had just been given the worst evaluation he had ever received in his long career with Carson& Son. He was promoted to supervisor of the machine shop when the company expanded and moved to its present location. The owner (Andrew Carson) had often stated that the companys success was due to the high quality of the work of machinists like Keiran. As supervisor, Keiran stressed the importance of craftsmanship and told his workers that he wanted no sloppy work coming from his department. At the moment, Keiran feels his department compromises quality to meet the target profit. His department depends on the sales department, which pressures them to deliver fast on small rush orders brought in to meet the target Module Code: LUBS5008M Page 4 of 4 sales. This leads to often interruptions of the main production and high set-up and machine overheads. When Phil Carson (owners son) became the plant manager, he directed that monthly performance comparisons be made between actual and budgeted cost of each department. The departmental budgets were intended to encourage the supervisors to reduce inefficiencies and to seek cost reduction opportunities. The company controller was instructed to have his staff tighten the budget slightly whenever the department attained its budget in a given month; this was done to reinforce the plant managers desire to reduce costs. The young plant manager often stressed the importance of continued progress towards attaining the budget; he also made it known that he kept the file of these performance reports for future reference when he succeeded his father. Required: Identify the problems that appear to exist in Carson & Sons budgetary control system. Explain how Carson & Son budgetary control system could be revised to improve its effectiveness.

( around 500 words)