● poor sales due to economic downturn
● increases in expenses such as wage expenses.
In addition to Australian operations, the company is considering manufacturing overseas to take advantage of reduced costs. The company is also considering diversifying its product range to reduce exposure to poor sales of one product.
Role
You are the manager of Sales Centre A, based in Adelaide. The centre has achieved great success over the last year and consistently outsells other sales centres. In fact, due to the large number of accounts managed by your sales team and larger staff, your centre is expected to sell as much volume as the other two sales centres put together. Naturally, you expect cost allocations to reflect the both the needs and importance to the business of Cost Centre A.
Task A
The Sales General Manager, Sam Gellar has asked you to review the master budget and cost centre budgets prepared by the Senior Accountant. She would like you to meet with her to discuss the whether the budget projections are achievable, accurate, understandable and fair.
She would like you to look at the budget for your cost centre closely, note any changes you think are necessary, develop an argument for the changes and negotiate those changes with her.
Information you are aware of includes:
● Sales in the first quarter (Q1), second quarter (Q2), and the fourth quarter (Q4) are generally 30% less than Q2.
● Sales in Q2 depend on completion of 90% of repair and maintenance.
● Commission negotiated with members of the sales team is now at 2.5%.
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