The Decision Package
We will continue with the example cited in our discussion of the master budget, in which the production unit is requesting additional funds to purchase new machinery as a means to increase the unit’s production level.
Decision Package - A1: Proposed budget under normal conditions, in which no new machinery is added.
Decision Package A2: Proposed budget under revitalized conditions, in which new machinery is added.
Decision Package A3: Proposed budget under strained conditions and no new machinery is added.
1. Each package comes with a narrative about the mission, aim and objective of the proposed budget as well as the circumstance under which the production unit is expected to operate. Study an example of the narrative below:
Decision Package A1
Mission : To maintain as well as increase production level in order to meet customers' demands at a moment's notice or same-day orders.
Aim : Increase the levels of production output by requiring around-the-clock shifts at the cutting division.
Objectives: Gain 100% customer satisfaction by rendering timely deliveries of goods ordered in accordance with the just-in-time trend in order placements.
Benefits: Gaining 100% customer satisfaction will ensure continued patronage and will sustain the sales' department's marketing thrust.
Decision Package A1 Implementing around-the-clock shifts at the cutting division.
Decision Package A2 Increase production by adding CAM for cutting materials by batches.
Decision Package A3 Require overtime work at the cutting division.
Decision Package A1 Increase in labor cost, cost of utilities and wear and tear of facilities.
Decision Package A2 Increase in cost of utilities (electricity).
Decision Package A3 Increase in labor cost, cost of utilities,and possible absenteeism among cutters, to cause further delay in raw materials preparation.