Question: As the senior management team of the company, you are required to revise the budget...

Question: As the senior management team of the company, you are required to revise the budget for 2020 to take into account the impact of recession

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Expert Solution

Being the senior management team member of the company who are involved in the making of the budget for the forthcoming year 2020, we have to consider the revision of the budget 2020 due to recession. The impact of the recession on the budget would be:

a) The revenues would be adjusted to the reduction of the growth rate of economy or GDP. Lower the income of the society will lead to lower purchase of company’s product.

b) The recession will lead to reduction in expense on the inputs like materials and lay-off of labors. Thus the expenditure on the budget is revised.

c) The volume of the sales units along-with the reduction in the selling price (due to recession) have to be up-dated in the revised budget.

d) The fixed costs like depreciation, interest, insurance, etc. have to be kept constant and are not subject to change in the revised budget.

e) The tax increase impact due to recession has to be revised on the budget.

The Budget preparing team have to calculate the reduction in economy growth rate or GDP, so that proper revision of the Budget take place.

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ekkarill92 answered 2 years ago

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