BYP 9-1 (Continued)
CREATIVE DESIGNS
Selling and Administrative Expense Budget
For the Year Ending December 31, 2013
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Total
Expected unit sales
1,000
1,500
750
750
4,000
Variable selling and
administrative costs
at $45 per unit sold
$45,000
$67,500
$33,750
$33,750
$180,000
Fixed selling and
administrative costs
7,500
7,500
7,500
7,500
30,000
Total selling and
administrative costs
$52,500
$75,000
$41,250
$41,250
$210,000
BYP 9-2 DECISION-MAKING ACROSS THE ORGANIZATION
cal gathering and manipulation of data. This suggests there will be little
enthusiasm for implementing the budget.
The budget process is the merging of the requirements of all facets of
the company on a basis of sound judgment and equity. Specific instances
following:
1. The sales by product line should be based upon an accurate sales
than the reverse.
2. Production costs probably would be the easiest and most certain
before budgets for marketing costs and corporate office expenses
are set.
3. The initial meeting between the vice president of finance, executive
(b) Palmer Corporation should consider the adoption of a “bottom to top”
(participative) budget process. This means that the people responsible
for performance under the budget would participate in the decisions
by which the budget is established. In addition, this approach requires
BYP 9-2 (Continued)
The sales forecast should be developed considering internal sales
(c) The functional areas should not necessarily be expected to cut costs
when sales volume falls below budget. The time frame of the budget
(one year) is short enough so that many costs are relatively fixed in
fall below target when:
2. Budgeted costs were more than adequate for the originally targeted
4. There are discretionary costs which can be delayed or omitted with
(CMA adapted)
BYP 9-3 MANAGERIAL ANALYSIS
(a) Direct materials Either lower quality materials resulting in an inferior
Direct labor Reduced production resulting in lost sales, or
Insurance Less coverage; may increase risk beyond acceptable
levels.
Depreciation To reduce depreciation, fixed assets would have to
sales.
Sales salaries Lost sales.
Office salaries Less effective administrative functions.
lost sales.
(b) Given the nature of their product, a decline in quality should be
avoided, since this could result in lower future sales. Direct materials
represent the largest single cost, and thus perhaps the greatest
to take pay cuts if a profit-sharing mechanism is introduced.
BYP 9-4 REAL-WORLD FOCUS
(a) The factors that affect the budgeting process at Network Computing
product components (raw materials).
In addition, the budgeting process will be affected by the Company’s
BYP 9-5 REAL-WORLD FOCUS
spending.
(b) In addition to saving money and improving services, zero-based
budgeting may:
Increase restraint in developing budgets;
(c) On the cost side of the equation, zero-based budgeting:
May increase the time and expense of preparing a budget;
May be too radical a solution for the task at hand. You don’t need a
sledgehammer to pound in a nail;
doesn’t happen.
(d) In Oklahoma, which has recently adopted zero-based budgeting, officials
are applying the method to two departments and several agencies each