Management Case Study: L. PLC

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Management Summary:
Planning tools and techniques are used by almost every successful business, the purpose is to keep the business on track and it also helps mangers to assess the condition of the business and act accordingly so that the business meet its goals. Different tools and techniques in which some are basic and some sophisticated are developed during the course of time for helping managers and business to be successful entities. Various techniques and tools are available to plan and control used my managers these include budget, plan, Work Breakdown Structure, Gantt charts, Network Analysis and Resource histogram Etc.
Case Study:
L plc, a manufacturer of small home electrical products, has enjoyed substantial growth
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There are two main methods for establishing the budget is:
• Top-down.
• Bottom-up.
Top-down budgeting describes the situation where the budget is imposed `from above`. Mangers are allocated a budget for the project based on an estimate made by senior management. The figure may prove realistic, especially if similar projects have been undertaken recently. However this technique is used simply because it is quick, or because only a certain level of funding is available.
In bottom-up budgeting the project manager consults the project team, and others, to calculate a budget based on the tasks that make up the project. In this process Work breakdown structure (WBS) is a useful tool.
The budget may express all resources in monetary amounts, or may show money and other resources – such as staff hours. A monetary budget is often used to establish the current cost variance of the project. To establish this we need:
a) The Actual Cost of Work Performed (ACWP). This is the amount spent on the project
b) The Budgeted Cost of Work Scheduled (BCWS). The amount that was budgeted to be spent to this point on scheduled
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A forecast can not be confused with a budget.
M Company has been selected as a potential take-over target. It is a medium sized, family run business, which is located 20 kilometer from L plc manufacturing plant. M Company specializes in the manufacture of electrical components used in the car industry, but it is felt that their factory set up would be able to adapted to L plc`s products. Initial figures from the finance director suggest that the purchase price of M company would be around $6m and he estimates the other costs (cost of refurbishing M Company`s factory, new integrated computer systems, legal costs etc.) would be around $3m.
As mentioned in the example after the company decided to take-over a nearby business for increasing their production and meeting the target, the finance department makes a budget for the upcoming time in which he uses forecasts method to get to the estimate of $6m.
$6m will be allocated in the budget by the finance department, and the other cost of $3m will also be part of the

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