Companies at times find very difficult to prepare the planning budgets due to the intra- departmental conflicts like marketing head usually presses hard sales team for more sales with lesser cost but sales team had its own objective in mind for setting the budget targets, However, Al- Salam Company prepared its estimates amid confusion and provided the following information to help prepare the master budget for its first four months of operations:

The budgeted selling price per unit is Rs.105. Budgeted unit sales for June, July, August, and

September are 11,200, 13,100, 14,700, and 15,850 units, respectively. All sales are on credit. Sixty percent of credit sales are collected in the month of the sale and 40% in the following month.

The ending finished goods inventory equals 10% of the following month’s unit sales.

The ending raw materials inventory equals 15% of the following month’s raw materials production needs.

Each unit of finished goods requires 8 pounds of raw materials. The raw materials cost Rs. 3.00 per pound.

Forty percent of raw materials purchases are paid for in the month of purchase and 60% in the following month.

The direct labor wage rate is Rs.25 per hour. Each unit of finished goods requires two direct labor-hours.

The variable selling and administrative expense per unit sold is Rs.5.25/-

The fixed selling and administrative expense per month is Rs.65,000.

Required:

From the above company’s budgeted related information, do you think the company will have some projected profit and how much may it be? If not so, then what would you suggest to make changes in the budgetary estimates?

Can you suggest some measures to the management to get rid of the intradepartmental or interdepartmental conflicts while setting the departmental budgetary targets in terms of revenue and expenses?