Ferguson and Son Manufacturing is experiencing many problems with its current budgetary control system. Inefficiencies in their system reduce the efficiency of the business. First, Tom, the machine shop manager, knows what the accounting report will show at the meetings. He doesn't know if the report will be good or bad. If Tom has an idea of ​​what's going on, he knows how to assess whether he's on track to meet budget goals. He doesn’t know exactly where the inefficiencies are or how to fix them. Tom needs to know exactly what the owner and managers are looking for so he can make the necessary adjustments. Second, the system used is based solely on cost reduction. Emory believed the company's goal was a quality product, but management's goal appears to be cost reduction. The company owner promoted Tom because of the quality of his work as a machinist, meaning that quality was once a major goal of the company. The owner's son, Robert Ferguson, seems to be primarily focused on cutting costs and disregards the quality of the work. The current system only rewards cost reductions, which will result in managers not focusing on the quality of work. Poor work will undoubtedly be detrimental to Ferguson. If Robert focuses only on cost reduction, customer satisfaction will decrease. Employees should not be mistaken about the company's goals. The third problem concerns the machines in the workshop. They lost a day of work due to a hydraulic machine breakdown. Faulty machines can lead to faulty products, lost work hours and loss of resources. Faulty machines will lead to increased product costs. Fourth, the current system does not take into account that the workforce largely stops...... middle of paper ...... regarding its pricing policies, inventory investments , its investments in equipment, etc. Labor cost can improve Ferguson's ROI with a few steps. Ferguson needs to ensure that it prices its services correctly. They must track production costs, determine the true value of the service, and ensure the work is done efficiently. With an activity-based costing system, Ferguson will improve its ROI and free cash flow. Costing will provide a cost and pricing protocol and facilitate the realization of profits whose figures will work positively with the return on investment. Planned spending within the company's operations will enable the budgetary control system to increase the company's free cash flow. Ferguson's new budgeting system will not only increase the company's profitability, but also increase efficiency in achieving the company's mission..