Drake Inc. is a multiproduct firm with several manufacturing plants. Management generally has been pleased with the operation of all but the Swan Plant. Its poor operating performance has been traced to poor control over plant costs. Four plant managers have resigned or been terminated during the last 3 years.
David Green was appointed the new manager of the Swan Plant on February 1, 20B. Green is a young and aggressive individual who had progressed rapidly in Drake's management development program and had performed well in lower-level management positions.
Green had been recommended for the position by Susan Bradley, Green's immediate supervisor. Bradley was impressed by Green's technical ability and enthusiasm. Bradley explained to Green that the assignment as Swan Plant manager was approved despite the objections of some of the other members of the executive management team. Bradley told Green that she had complete confidence in him and his ability and was sure that Green wanted to prove that she had made a good decision. Therefore, Bradley expected Green to have the Swan Plant on budget by June 30.
Required:
(1) Critically evaluate the budget practices described in the case.
(2) What are the likely immediate and long-term effects on David Green and Drake Inc. if the present method of budget administration is continued?