ORIOLE FURNITURE Case Analysis Report
Current Situation
This case talks about the hard situation facing Mr. Bernard Mente, the vice President of the Rattan Furniture Division of Oriole Furniture, Inc. In this report, after carefully analyzing the budgeted plan, sales objectives, profits objectives, and his proposed ideas to fix the problems, I addressed some possible solutions that could possibly help Mr. Mente out of the bad situation.
About budgeted profit plan
As one of the four divisions of Oriole Furniture, Rattan Furniture division, a profit center, had been established four years earlier before this case was presented. For the past three years, its sales growth rate had been 35% on average, with last year’s sales being $60 million. Each division of Oriole Furniture made a profit plan six months before the start if the plan year. The method they used to make the profit plan is Output/Input Approach or Top-down Approach, which means that the budgeted plan starts with the sales forecast and then works backward to budget the inputs such as variable expenses and fixed expenses. To be more specific in this case, the product specialists and the field sales force forecast the sales of Rattan as $75,130,000 and $77,010,000, respectively. Finally, Mente decided to use $77,010,000. We can see that this number was kind of little lower than the possible forecast sales based on the average sales growth rate of previous years, that is, sales of last year $60 million X sales growth rate 35% = $81 million, because Mente was worried about the direction of the economy. However, after Mr. Mensan, the company President, reviewed Mente’s plan, Mensan pushed Mente to revise his sales plan to $81 million and Mente agreed finally.
Mente’s Concerns
From January to May, the actual performance was not that good as budgeted due to the economy recession—they managed to meet the first three months’ expected sales but failed the following two months due to the...