Profi t Planning 413 CASE 9-29 Evaluating a Company's Budget Procedures [LO1] Tom Emory and Jim Morris strolled back to their plant from the

Profi t Planning 413CASE 9–29 Evaluating a Company’s Budget Procedures [LO1]Tom Emory and Jim Morris strolled back to their plant from the administrative offices of Ferguson& Son Manufacturing Company. Tom is manager of the machine shop in the company’s factory;Jim is manager of the equipment maintenance department.The men had just attended the monthly performance evaluation meeting for plant departmentheads. These meetings had been held on the third Tuesday of each month since Robert Ferguson,Jr., the president’s son, had become plant manager a year earlier.As they were walking, Tom Emory spoke: “Boy, I hate those meetings! I never know whethermy department’s accounting reports will show good or bad performance. I’m beginning to expectthe worst. If the accountants say I saved the company a dollar, I’m called ‘Sir,’ but if I spend evena little too much—boy, do I get in trouble. I don’t know if I can hold on until I retire.”Tom had just been given the worst evaluation he had ever received in his long career withFerguson & Son. He was the most respected of the experienced machinists in the company. He hadbeen with Ferguson & Son for many years and was promoted to supervisor of the machine shopwhen the company expanded and moved to its present location. The president (Robert Ferguson,Sr.) had often stated that the company’s success was due to the high-quality work of machinistslike Tom. As supervisor, Tom stressed the importance of craftsmanship and told his workers thathe wanted no sloppy work coming from his department.When Robert Ferguson, Jr., became the plant manager, he directed that monthly performancecomparisons be made between actual and budgeted costs for each department. The departmentalbudgets were intended to encourage the supervisors to reduce inefficiencies and to seek cost reductionopportunities. The company controller was instructed to have his staff “tighten” the budgetslightly whenever a department attained its budget in a given month; this was done to reinforce theplant manager’s desire to reduce costs. The young plant manager often stressed the importance ofcontinued progress toward attaining the budget; he also made it known that he kept a file of theseperformance reports for future reference when he succeeded his father.Tom Emory’s conversation with Jim Morris continued as follows:Emory: I really don’t understand. We’ve worked so hard to meet the budget, and the minute we do sothey tighten it on us. We can’t work any faster and still maintain quality. I think my men are ready toquit trying. Besides, those reports don’t tell the whole story. We always seem to be interrupting thebig jobs for all those small rush orders. All that setup and machine adjustment time is killing us. Andquite frankly, Jim, you were no help. When our hydraulic press broke down last month, your peoplewere nowhere to be found. We had to take it apart ourselves and got stuck with all that idle time.what should he do?