Could someone answer for me this question. Thank you in advance.

www.mhhe.co anual budgeting process in operating income before to keting manager formulates Marketing Depart from this budget, sales quotas by produculates, 1 If the com as planned? Explains PROBLEM -22 Evaluating Company Budget Procedures (101) Springfield Corporation operates on a calendar year basis. It begins the annu August, when the president establishes targets for total sales dollars and net oper for the next year The sales target is given to the Marketing Department, where the marketing sales budger by product line in both units and dollars. From this budget, sales units and dollars are established for each of the corporation's sales districts, The marketing manager also estimates the cost of the marketing activi target sales volume and prepares a tentative marketing expense budget. The executive vice president uses the sales and profit targets, the sales budget by tentative marketing expense budget to determine the dollar amounts that can be deve and corporate office expense. The executive Vice president prepares the budget for com then forwards to the Production Department the product-line sales budget in units amount that can be devoted to manufacturing. marketing activities required to suppe support to ne the dollar amours the budget for corporate expenses. 13 get by product line, and the voted to manufacturing units and the total dollar ufacturing plan that will oduction Department does not The production manager meets with the factory managers to develop a manufacturi onstraints set by the executive vice president produce the required units when needed within the cost constraints set by the executive budgeting process usually comes to a halt at this point because the Production Dena consider the financial resources allocated to it to be adequate. When this standstill occurs, the vice president of finance, the executive vice president, the manager, and the production manager meet to determine the final budgets for each of the normally results in a modest increase in the total amount available for manufacturing cos marketing expense and corporate office expense budgets are cut. The total sales and net operating figures proposed by the president are seldom changed. Although the participants are seldom pleased wil the compromise, these budgets are final. Each executive then develops a new detailed budget for the ones! tions in his or her area. vice president, the marketing eets for each of the areas. This ailable for manufacturing costs, while the None of the areas has achieved its budget in recent years. Sales often run below the target. When budgeted sales are not achieved, each area is expected to cut costs so that the president's profit target can Profit Planning still be met. However, the profit target is seldom met because costs are not cut enough. In fact, costs often run above the original budget in all functional areas. The president is disturbed that Springfield has not been able to meet the sales and profit targets. He hired a consultant with considerable relevant industry experience. The consultant reviewed the budgets for the past four years. He concluded that the product-linc sales budgets were reasonable and that the cost and expense budgets were adequate for the budgeted sales and production levels. Required: 1. Discuss how the budgeting process as employed by Springfield Corporation contributes to the failure to achieve the president's sales and profit targets. 2. Suggest how Springfield Corporation's budgeting process could be revised to correct the problem. 3. Should the functional areas be expected to cut their costs when sales volume falls below budget? Explain your answer. 2 (CMA, adapted) Cash Budget (L02, L08) . .hird auarter, in which peak www.mhhe.co anual budgeting process in operating income before to keting manager formulates Marketing Depart from this budget, sales quotas by produculates, 1 If the com as planned? Explains PROBLEM -22 Evaluating Company Budget Procedures (101) Springfield Corporation operates on a calendar year basis. It begins the annu August, when the president establishes targets for total sales dollars and net oper for the next year The sales target is given to the Marketing Department, where the marketing sales budger by product line in both units and dollars. From this budget, sales units and dollars are established for each of the corporation's sales districts, The marketing manager also estimates the cost of the marketing activi target sales volume and prepares a tentative marketing expense budget. The executive vice president uses the sales and profit targets, the sales budget by tentative marketing expense budget to determine the dollar amounts that can be deve and corporate office expense. The executive Vice president prepares the budget for com then forwards to the Production Department the product-line sales budget in units amount that can be devoted to manufacturing. marketing activities required to suppe support to ne the dollar amours the budget for corporate expenses. 13 get by product line, and the voted to manufacturing units and the total dollar ufacturing plan that will oduction Department does not The production manager meets with the factory managers to develop a manufacturi onstraints set by the executive vice president produce the required units when needed within the cost constraints set by the executive budgeting process usually comes to a halt at this point because the Production Dena consider the financial resources allocated to it to be adequate. When this standstill occurs, the vice president of finance, the executive vice president, the manager, and the production manager meet to determine the final budgets for each of the normally results in a modest increase in the total amount available for manufacturing cos marketing expense and corporate office expense budgets are cut. The total sales and net operating figures proposed by the president are seldom changed. Although the participants are seldom pleased wil the compromise, these budgets are final. Each executive then develops a new detailed budget for the ones! tions in his or her area. vice president, the marketing eets for each of the areas. This ailable for manufacturing costs, while the None of the areas has achieved its budget in recent years. Sales often run below the target. When budgeted sales are not achieved, each area is expected to cut costs so that the president's profit target can Profit Planning still be met. However, the profit target is seldom met because costs are not cut enough. In fact, costs often run above the original budget in all functional areas. The president is disturbed that Springfield has not been able to meet the sales and profit targets. He hired a consultant with considerable relevant industry experience. The consultant reviewed the budgets for the past four years. He concluded that the product-linc sales budgets were reasonable and that the cost and expense budgets were adequate for the budgeted sales and production levels. Required: 1. Discuss how the budgeting process as employed by Springfield Corporation contributes to the failure to achieve the president's sales and profit targets. 2. Suggest how Springfield Corporation's budgeting process could be revised to correct the problem. 3. Should the functional areas be expected to cut their costs when sales volume falls below budget? Explain your answer. 2 (CMA, adapted) Cash Budget (L02, L08) . .hird auarter, in which peak