A) Calculate the cost per unit for the variable cost.
B) Why do you think budget A has high costs and low sales forecasts?
C) Why do you think budget B has low costs and high sales forecasts?
D) How should the two groups participate to come to a consensus on the budget? What are the advantages of this approach?
Please refer to attached spreadsheet in Excel 2000.
a) calculation of variable cost per unit
Total variable cost $420,000 $555,000
total units 20,000 30,000
variable cost per unit $21 $18.50
b)why do you think budget A has high costs and low sales forecasts?
Meaning of bottom up approach
In bottom up approach, the employees or managers at the departmental level completes the budget for their respective departments. Each budget is rolled up in consolidated budget which will be reviewed by the executives. Bottom up approach is made by the managers at the department level and they strive to fix the low standard of sales units which they can easily achieve and high cost of production to enable them to have the cushion with respect to possible ...
The answer cotnains computation of cost per unit, top bottoam approach and bottom top approach and the consensus among various groups on budget.