Page 1 - OCS Workbook - Day 2 Suggested Solutions (May 2018)

SUGGESTED SOLUTIONS

CHAPTER EIGHT

EXERCISE ONE (BUDGETING AND CONTROL)

Email
To: Gwen Giovanni

Date: Today
Subject: Beijing Fashion Week 2018
______________________________________________________________________________

Hi Gwen
My thoughts on your queries concerning the Beijing Fashion Week proposal are given below.

The purpose of budgeting
There would be many benefits of setting up and using budgets for the tour, which include:

• Planning:
By setting detailed budgets it forces the management team to plan ahead and to take time
out to complete the budget process. It will allow us to look into the long term as well as
focusing on the short term.

For example, it would force us to consider how many sales we expect to make, how much
inventory to take, how many staff would attend and so on.
• Control and Evaluation:

The budget gives a benchmark against which to compare the actual results. Variance reports
of the difference between budgeted and actual results can be produced which can be used to
hold staff to account for inefficiencies and overspends.
Such reports will also allow us to set more realistic budgets in the future which could have a
knock on impact on whether or not we want to continue with the Beijing week going
forwards. Given or experience with other fashion weeks, hopefully we will be able to set
realistic budgets for Beijing.

• Coordination:
A more formal budget allows for the different parts of the business to be reconciled to each
other.
For example, we will need to ensure that samples of new products are ready in time for the
week. Similarly, sales and marketing will need to produce additional marketing materials in
different languages. A formal plan or budget will allow each department to work together.
• Communication:

Budgets can be used to communicate targets to all staff within the business. Again this is
going to be especially important with the new proposal. We cannot expect staff to work
efficiently if they are unaware of the overall plan.

• Motivation
Budgets can also be used to motivate staff. This issue is discussed in more detail below

KAPLAN PUBLISHING 57