Purchase Solution

Budget-top-down &bottom-up approach

Not what you're looking for?

Ask Custom Question

In the budget-setting process, budget A was put together by lower management, including sales representatives, purchasing managers and factory supervisors. Budget B ws put together by senior management.

A B
Unit Sales 10000 15000
Dollar Sales 2000000 3000000
Less Variable expenses:
Direct Materials 1100000 1500000
Direct Labor 220000 300000
Variable Overhead 110000 150000
Variable Selling and
Admin expense 88000 120000
Total Variable expenses 1518000 2070000

Contribution Margin
Less Fixed expenses:
Manufacturing Overhead 350000 300000
Selling and administrative 200000 200000
Taxes and Interest 10000 10000
Total fixed expenses 560000 510000

Net Income (loss) (78000) 420000

A. Calculate the cost per unit for the variable costs.
B. Why do you think budge A has high costs and low sales forecasts?
C. Why do you think budget B has low costs and high sales forecasts? What are the behavioral implications of this top-down approach?
D. How should the two groups participate to come to a consensus on the budget? What are the advantages of this approach?

Purchase this Solution
Solution Summary

The answer contains the behavioural implications of top-down approach and bottom-up approach with respect to variable cost and fixed cost.

Purchase this Solution
Free BrainMass Quizzes
Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

View More Free Quizzes
Related BrainMass Solutions

  • Preparing a Budget: Top-down and bottom-up approach

    521157 Preparing a Budget: Top-down and bottom-up approach Identify and describe a project where the top-down budgeting approach would be most appropriate. Detail your rationale for the decision and list the advantages for using that approach.

  • Centralized or decentralized budgeting, bottom-up/top-down.

    It is much more reliable and transparent if a centralized budgeting approach is followed. 2. What is meant by bottom-up or top-down with regard to budgeting? A top-down approach is a centralized budget.

  • Bottom-up sales management budgeting

    A 'bottom-up' approach, starts with the detail of expected or desired sales and accumulates the budget from the detail A 'top-down' approach starts with senior management's expectations, goals, statistics, or needs in setting an overall, high level budget

  • marginal costing,topbottom & bottom top approach

    Meaning of bottom up approach In bottom up approach, the employees or managers at the departmental level completes the budget for their respective departments.

  • Bottom-up budgeting

    563584 Bottom-up budgeting Do you see a conflict between the project manager (supporting the bottom-up budget) and the senior management (supporting the top-down budget)?

  • Bottom-Up and Top-Down Budgets

    510823 Bottom-Up and Top-Down Budgets Bottom-up and top-down are the two traditional approaches to estimating project budgets. Contrast the strengths of bottom-up and top-down approaches to project budgeting.

  • bottom-up approach to managing labor costs

    In case of the top down approach to labor costs the budget for labor is created by the top management and is given to the lower layers of the organization.

  • Period and product costs

    The decision to use top down or bottom has a profound impact on the organization. There are a lot of large organizations that create their budget on the top down approach.

  • Project Budget Refinement

    The 'top-down' budget is then broken down into detail for company operating units. The top -down approach is more centralized in approach and may take less time.

  • Top Down & Bottom Up Planning Models for Education

    409347 Top Down & Bottom Up Planning Models for Education Need some ideas ? Tks What judgment would you make about "top-down" versus "bottom-up" planning models for the higher education environment?

View More Related Solutions