You Have Recently Accepted a Position as a Manager with Athletic

question 62

Short Answer

You have recently accepted a position as a manager with Athletic Academy.At a recent managers meeting,the controller asked for input on how to make the budgeting process more effective.Specifically,the controller indicated that the employees did not seem to be committed to the budget during the previous period.Unfortunately,none of the managers reached their targeted sales projections for the previous period.

Required:

Explain to the other managers what method the company apparently used in the previous period and why the method created the lack of commitment. Also discuss flaws the alternative approach to budgeting.

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Definitions:

Unit Sales

A measurement of the total quantity of units of a product sold by a company.

Contribution Margin

The sum left over from sales income once all variable costs are subtracted.

Fixed Expenses

Costs that do not change with the level of production or sales over a certain time period, such as rent, insurance, and salaries.

Break Even

A situation where the overall expenses match the overall income, causing zero net profit or loss.