Mathew Philp, president of North Idaho Mining, Ltd., has made budgets a major focus for managers. Making budget was such an important goal that the only two managers who had missed their budgets in 20X7 (by 2% and 4%, respectively) had been summarily fired. This caused all managers to be wary when setting their 20X8 budgets. The Red Mountain Copper Division of North Idaho Mining had the following results for 20X7: : (Click the icon to view the 20X7 results.) Molly Stark, general manager of Red Mountain Copper, received a memo from Philp that contained the following: We expect your profit for 20X8 to be at least $209,000. Prepare a budget showing how you plan to accomplish this. Stark was concerned because the market for copper had recently softened. Her market research staff forecast that sales would be at or below the 20X7 level, and prices would likely be between $0.92 and $0.94 per pound. Her manufacturing manager reported that most of the fixed costs were committed and there were few efficiencies to be gained in the variable costs. He indicated that perhaps a 2% savings in variable costs might be achievable but certainly no more. Read the requirements. Requirement 1. Prepare a budget for Stark to submit to headquarters. What dilemmas does Stark face in preparing this budget? Begin by preparing an optimistic preliminary budget assuming a level sales volume, a $0.94 per pound price, and a 2% decrease in variable costs. 20X8 Budget Sales Variable costs Fixed costs Pretax profit i Data Table $ Sales, 1.6 million pounds @ $0.95/pound Variable costs 1,520,000 880,000 450,000 Fixed costs, primarily depreciation 190,000 Pretax profit Vhat dilemmas does Stark face in preparing this budget? The optimistic budget that Stark prepared above the profit goal. As a result, Stark does not meet Requirement 2. What problem(s) do you see in t North Idaho Mining? exceeds meets nter any number in the edit fields and then cc stion. The optimistic budget that Stark prepared above the profit goal. As a result, Stark may want to revise her budget to meet the target, even though she believes the assumptions of such a budget to be unreliable. will likely have no reservations about submitting it to headquarters