You are the managerial accountant at Reliable Company and are part of the organization's budgeting committee. You have been assigned to support the marketing department and manage its master budget. The marketing department is responsible for the following:

• Managing the firm's marketing
• Hiring subcontractors
• Selling the consulting expertise to smaller outside firms

The department's expenses are as follows:

• Salaries and benefits of $48,000/month
• Web site operations of $21,000/ month
• Online advertising expenses of $15,000/month
• Miscellaneous expenses of $3,500/month

The sales forecast for its consulting services are as follows:

• April: $190,000
• May: $200,000
• June: $205,000

The department pays a sales commission of 5%, and this is paid in the following month. Subcontractor expenses are estimated at 45% of sales and are paid the month after they are billed. Consulting fees are collected 20% in the month of sale, 70% in the following month, and 10% in the second month following sale.

Discuss the benefits and limitations of the master budgeting process, the budgets included in the master budgeting process and the steps that the marketing department will take to prepare the master budget.

Consulting Revenues(Chapter 20 - PAGE 1005)
Less: Commissions
Less: Subcontractor expenses
Net revenues
Expenses
Salaries and benefits
Web site operations
Online advertising expenses
Other misc. expenses
Total expenses
Net department expenses
Expected Cash Collections(Chapter 20 - PAGE 1008-1009)
June collections on account:
April sales
May sales
June sales
Total cash collections
Expected Cash Disbursements(Chapter 20 - PAGE 1009-1010)
Salaries and benefits
Web site operations
Other misc. expenses
Online advertising expenses
Sales commissions (5% of sales)
Cost of sales (45% of sales)
Total cash disbursements
Net impact on cash

• How does the master budget help the manager understand the company's external environment and the impact the environment have on the marketing department?
• How does the budget help the manager with forecasting?
• How does the budget help the marketing department coordinate their needs with other departments?
• How can the budget be used to evaluate the marketing department's performance?