(a) Discuss the differences between static and flexible budgets and explain why both types of budgets may be used in an organisation. Discuss how activity-based budgeting differs from traditional budgeting. (20 marks) (b) Your firm uses a top-down budget that sets the sales quota for each of its 180 salespeople. The salespeople are compensated based on a commission as well as a bonus whenever actual sales exceed their individual budgeted sales quota. Each salesperson's quota is estimated by senior marketing managers. MP Consultants has emphasised that your current budgeting system does not take advantage of what your salespeople know about future sales to their customer regions. By ignoring this information, your firm does not effectively plan for this growth, and you are at a competitive disadvantage when deciding to add capacity to your fibre optic network in a timely and efficient way. Moreover, DMP point to extensive research documenting that when people participate in setting budgets that are used to evaluate their performance, these people more readily accept the budgets and there is an increase in employee morale. That is, "participative budgeting" (where employees who are judged against the budget participate in setting the budget) results in happier, more motivated employees. DMP Consultants has made a proposal to implement a bottom-up, participative budgeting scheme to replace your top-down system. What can be short memo to the head of the finance department that analyses the advantages and disadvantages of DMP's proposal.