It's panic time at Manufacturing. Profits have been declining, so the owner's son comes to the rescue to run the company. He asks a consultant to determine what's wrong. And the consultant has specific answers: The company's pricing guidelines are all wrong, there needs to be a budgeting system to reverse the downward slide in profits, and a former employee should be rehired. This case provides students with the data for constructing a production and raw-materials budget, flexible-expense budget, income statement, balance sheet, and cash budget. See also Blackheath Manufacturing Company (UVA-C-2197). Excerpt UVA-C-2198 Rev. Jun. 15, 2009 BLACKHEATH MANUFACTURING COMPANY—REVISITED Part 1 Mr. had promoted Lee High to vice president of finance. Lee had practically been running the firm for several years, during which time sales and profit had been declining. On November 15, Mr. announced that his son, Trafalgar Blackheath, would take over as owner and president on January 1. Trafalgar wasa graduate of an MBA program, and for several years had been working for a large consulting firm as a marketing specialist. In their private discussions, Mr. told his son that the problems in the family firm were marketing rather than financial, so the situation was ready-made for Trafalgar. Mr. Blackheath, it seems, had been completely taken by Lee High. When Trafalgar arrived on December 1 and began to read various internal reports, he realized Manufacturing did not have a cash budget, and there didn't seem to be much in the way of financial planning. Trafalgar asked Lee about this. Lee's response was that Manufacturing ran on the basis of several well-developed decision rules, and budgets weren't necessary because if the firm ever ran out of funds, Mr. simply deposited $ 10,000 or $ 20,000 in the bank. Trafalgar's response was clear: “My father is a millionaire, but I am not!' Lee indicated he didn't know much about budgeting, but he would get an assistant to work up some “stuff.” . . .