1.what is a budget. How does a budget contribute to good Management. (2). Jane Gilligan ask your...

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1.what is a budget. How does a budget contribute to good Management. (2). Jane Gilligan ask your help in understanding the essential of effective budgeting. Identify the essential of Jane. (3). Lori Wilkins maintain that the only difference between budgeting and long-range planning is time. Do agree? Why or why not? (4). What is participative budgeting? What are it's potential benefits? What are it's potential disadvantage?

Robert · Accepted Answer

Question 1 
a) The fixed costs are expected to remain the same and thus would not be considered in 
incremental analysis. 
Unit variable cost of sales at 90% capacity = (3150000-900000)/90000 = $ 25 
Unit variable selling and administrative expenses at 90% capacity = (360000-162000)/90000 
= $ 2.2 
Currently 90% of the capacity produces 90,000 units, hence remainder capacity would 
produce only 10,000 units and hence 1,000 units would be decreased from the current sales. 
Incremental sales revenue = 11000*30 – 1000*50 = $ 280,000 
Incremental variable cost of sales = 10000*25 = $250,000 
Incremental variable selling and administrative expenses = 2.7*10000 + 0.5*90000 = $ 
72,000
b) From the above computation, it is apparent that the Globetrotters should not accept 
the offer as the incremental variable costs exceed the incremental revenues which 
would be generated as a result of the acceptance of the offer. Thus, it would lead to a 
lowering of the overall profits for the company.
c) Let the SP of each ball be $ X 
Then, 90000*(X-25-2.2) – (900000+162000) = (90000*5) 
Solving the above, we get X = $ 44 
d) Other non-financial factors which need to be considered is the current market share, 
nature of economy along with the selling price offered by the peer group companies 
that are functioning in the market.
Question 2 
a) Incremental cost for each unit of purchase = $ 38 
Incremental saving of direct material for each unit of purchase = $ 15 
Incremental saving of direct labour for each unit of purchase = $10  
Incremental saving of variable factory overhead for each unit of purchase = $ 8 
Incremental saving of fixed cost for each unit of purchase = 20% of 15 = $ 3 
Hence, total savings per unit purchase = 15+10 + 8 + 3 = $ 36 
It is apparent that the incremental cost per unit exceeds the savings per unit realised by the 
company and thus the company must not purchase from outside vendor and continue the in-
house production. 
b) Additional income in the form of rent income = $ 5,500 per month 
Assuming that the production of 10,000 sticks is done on the monthly basis,

1.what is a budget. How does a budget contribute to good Management. (2). Jane Gilligan ask your help in understanding the essential of effective budgeting. Identify the essential of Jane. (3). Lori...

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