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Tom and David work are salespeople that work in Prince George. Tom's sales area is the College Heights division and David sells in the Hart Division. Last year actual sales and budget are as follows: College Heights Division Actual Year 2020 2021 $ 2022 $ 12,900 $ 2019 $ 12,930 $ 2023 $ 13,041 $ 2024 Budget $ 12,000 $ Variance 15,000 $ 3,000 12,900 $ 12,500 $ Hart Division Budget Actual $14,000 $ 16,000 $ 400 $ 14,600 $ 16,200 $ 100 $ 15,080 $ 16,500 $ 370 $ 15,506 $ 16,700 $ 241 $ 15,864 $ 17,000 $ 13,000 $ 13,300 $ 12,800 $ Variance 2,000 1,600 1,420 1,194 1,136 Head office sets the budget each year. If actual sales exceed the budget, next year's budget is increased; if not, next year's budget is set to equal the prior year's budget. Required a. Calculate the 2024 budget for each division. b. Discuss the current approach to budgeting the company is taking and specifically discuss the approach with how the next year's budget is being set and the disadvantage in this case specifically for the College Heights Division. c. Tom is upset that his budget is always increased each year. Tom knows his clients well in the College Heights division and predicts that actual 2024 sales will be approximately $11,000 to $12,000. Identify one dysfunctional behaviour Tom may engage in. d. Discuss potential advantages the company could gain if they were to change to participative budgeting.

Tom and David work are salespeople that work in Prince George. Tom's sales area is the College Heights division and David sells in the Hart Division. Last year actual sales and budget are as follows: College Heights Division Actual Year 2020 2021 $ 2022 $ 12,900 $ 2019 $ 12,930 $ 2023 $ 13,041 $ 2024 Budget $ 12,000 $ Variance 15,000 $ 3,000 12,900 $ 12,500 $ Hart Division Budget Actual $14,000 $ 16,000 $ 400 $ 14,600 $ 16,200 $ 100 $ 15,080 $ 16,500 $ 370 $ 15,506 $ 16,700 $ 241 $ 15,864 $ 17,000 $ 13,000 $ 13,300 $ 12,800 $ Variance 2,000 1,600 1,420 1,194 1,136 Head office sets the budget each year. If actual sales exceed the budget, next year's budget is increased; if not, next year's budget is set to equal the prior year's budget. Required a. Calculate the 2024 budget for each division. b. Discuss the current approach to budgeting the company is taking and specifically discuss the approach with how the next year's budget is being set and the disadvantage in this case specifically for the College Heights Division. c. Tom is upset that his budget is always increased each year. Tom knows his clients well in the College Heights division and predicts that actual 2024 sales will be approximately $11,000 to $12,000. Identify one dysfunctional behaviour Tom may engage in. d. Discuss potential advantages the company could gain if they were to change to participative budgeting.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Tom and David work are salespeople that work in Prince George. Tom's sales area is the College. Heights division and David sells in the Hart Division. Last year actual sales and budget are as follows: College Heights Division Actual Hart Division Actual Budget Variance Budget Variance $ 12,000 $ 15,000 $3,000 $ 14,000 $ 16,000 $ 2,000 1,600 1,420 1,194 1,136 Year 2020 2021 $ 12,900 $ 12,500 $ 400 $ 14,600 $ 16,200 $ 2022 $ 12,900 $ 13,000 $ 100 $ 15,080 $ 16,500 $ 370 $ 15,506 $ 16,700 $ 241 $ 15,864 $ 17,000 $ 2019 2023 2024 $ 12,930 $ $ 13,041 $ 13,300 $ 12,800 -$ Head office sets the budget each year. If actual sales exceed the budget, next year's budget is increased; if not, next year's budget is set to equal the prior year's budget. www. Required a. Calculate the 2024 budget for each division. b. Discuss the current approach to budgeting the company is taking and specifically discuss the approach with how the next year's budget is being set and the disadvantage in this case specifically for the College Heights Division. c. Tom is upset that his budget is always increased each year. Tom knows his clients well in the College Heights division and predicts that actual 2024 sales will be approximately $11,000 to $12,000. Identify one dysfunctional behaviour Tom may engage in. d. Discuss potential advantages the company could gain if they were to change to participative budgeting.
Transcribed Image Text:Tom and David work are salespeople that work in Prince George. Tom's sales area is the College. Heights division and David sells in the Hart Division. Last year actual sales and budget are as follows: College Heights Division Actual Hart Division Actual Budget Variance Budget Variance $ 12,000 $ 15,000 $3,000 $ 14,000 $ 16,000 $ 2,000 1,600 1,420 1,194 1,136 Year 2020 2021 $ 12,900 $ 12,500 $ 400 $ 14,600 $ 16,200 $ 2022 $ 12,900 $ 13,000 $ 100 $ 15,080 $ 16,500 $ 370 $ 15,506 $ 16,700 $ 241 $ 15,864 $ 17,000 $ 2019 2023 2024 $ 12,930 $ $ 13,041 $ 13,300 $ 12,800 -$ Head office sets the budget each year. If actual sales exceed the budget, next year's budget is increased; if not, next year's budget is set to equal the prior year's budget. www. Required a. Calculate the 2024 budget for each division. b. Discuss the current approach to budgeting the company is taking and specifically discuss the approach with how the next year's budget is being set and the disadvantage in this case specifically for the College Heights Division. c. Tom is upset that his budget is always increased each year. Tom knows his clients well in the College Heights division and predicts that actual 2024 sales will be approximately $11,000 to $12,000. Identify one dysfunctional behaviour Tom may engage in. d. Discuss potential advantages the company could gain if they were to change to participative budgeting.
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