Question

For this assignment you are to assume that you are involved in the preparation of your company's master budget. The company's sales team provides information concerning expected unit sales and pricing for use in preparation of the sales budget. Further, you are aware that a portion of the sale team's compensation is based on their ability to meet the sales budget. Write a memorandum to the vice president of finance outlining your concerns about this practice. Include any concerns that you have about potential bias in the information provided by the sales team.

Answer 1

To

The Vice President - Finance

Subject : Sales Budget Memorandum

Sir Sales budget is the first stage for starting the budget Preparation since based on assumption of how many units will be sold during the year we can estimate Raw Material Required, Labour hours required to produce and how much Profits we can forecast in the coming year.

Our sales team Provide the quantity of budget units to be sold during the year which is not reasonable since they quantified the units more in order to increase the compensation rate per unit sold.There fore they took shelter from their side but it has effect on entire cost of the organisation since expense estimation will be done on the sales budget and finally results in un favourable variance between Actuals And Budgeted Amounts.

Therefore I here by put the above potential bias information over to you which is Provided by sales Team.Kindly take necessary action to ammend the budget and ensure un favourable variances not to occur