Crunch Numbers is a manufacturer of calculators. In the budget-setting process, budget A was put together by lower and middle management. Budget \(B\) was put together by senior management.

\section*{Required}
A. Calculate the cost per unit for the variable costs.
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? 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?

Transcribed Image Text:

A B Unit sales Dollar sales Less variable expenses: 20,000 30,000 $600,000 $900,000 Direct materials $260,000 $360,000 Direct labor 40,000 60,000 Variable overhead 60,000 75,000 Variable selling and administrative expense 60,000 60,000 Total variable expenses $420,000 $555,000 Contribution margin $180,000 $345,000