1. Discuss the importance of the sales forecast and items that influence its accuracy.

2. Norman Whiteside, insurance sales manager at Eastern Assurance, has been asked to project how many new policies he will sell in 20x4. The local economy has been growing, and the insurance industry has experienced a 10% increase in the number of new policies sold over each of the past five years. In 20x3, Whiteside sold 5,000 new policies.

Whiteside is paid a salary, plus a bonus of $200 for every new policy sold above the budgeted amount. Thus, if the annual budget calls for 1,000 new policies, and 1,080 new policies are sold, the bonus will be $16,000 (80 $200).

Whiteside believes that the local economy will continue to grow at the same rate in 20x4 as it has in recent years. He decided to submit a projection of 5,300 new policies for 20x4.

Required:

Define and explain the negative consequences of budgetary slack. Also discuss the bank's bonus system for the new-accounts manager and how the bonus program tends to encourage budgetary slack.