IGNOU : M.COM : MCO 5 : UNIT 11 : Q - 6. Write a note on Revision of Standards.

Ans. Revision of Standards

Standard cost is based on a number of factors. These factors some may be internal or external may vary from time to time depending upon different situations. Standard cost may become unrealistic if it is not revised according to the changed circumstances. Then a question arises what would be the period in which standards should be set? If the standard is set for a shorter period it is expensive and frequent revision of standards will impair the utility and purpose of the standard cost. If the standard is set for a longer period it may not be useful particularly during periods of high inflation and rapidly changing technological environment. Therefore, standards are normally set for a fixed period of one year and revised annually at the beginning of accounting period. If there are major changes, a revision may also be required within the accounting period. If there are minor changes, the causes of difference between actual and standards may be explained without being revised the standards. There are certain conditions which necessitate the revision of standard costs. These conditions are:

i) Changes in price levels of materials, labour and overheads

ii) Technological changes

iii) Changes in production methods or product mixes

iv) Changes in plant capacity utilization

v) Errors discovered in setting standards

vi) Changes in designs or specification

vii) Changes in the policy of organisation

viii) Changes in government policy affecting the product or organisation, etc.

 

IGNOU : M.COM : MCO 5 : UNIT 11 : Q - 5. Explain the meaning of Standard Hour.

Ans. Standard Hour

Production may be expressed in different units of measurement such as kilos, tones, liters, numbers etc. When a concern produces different types of products, the production will be expressed in different units. It is difficult to aggregate the production which is expressed in different units. To overcome this difficulty, the production is to be expressed in a common measure known as ‘Standard Hour’. The standard hour is the quantity of output which should be produced in one hour. A standard hour may be as “A hypothetical hour which represents the amounts of work which should be performed in one hour under stated conditions.” A measure of standard hour is useful for the purpose of comparison of performance of one department to another. It is also useful to compute efficiency and activity ratios.

For example if 20 units of product A are produced in 2 hour, and 40 units of product B are produced in 5 hours, the standard hours represent 10 units of product A [20 units/ 2 hours] and 8 units of product B [40 units/5 hrs]. Therefore, standard 2 hrs 5 hrs hour is the quantity of production of a given product for one clock hour.

IGNOU : M.COM : MCO 5 : UNIT 11 : Q - 4. Write a detailed note explaining the advantages and limitations of standard costing.

Ans. Advantages of Standard Costing

The introduction of Standard Costing system may offer many advantages. It varies from one business to another. The following advantages may be derived from standard costing in the light of the various objectives of the system:

1. To measure efficiency : Standard Costs provide a yardstick against which actual costs can be measured. The comparison of actual costs with the standard cost enables the management to evaluate the performance of various cost centres. In the absence of standard costing, efficiency is measured by comparing actual costs of different periods which is very difficult to measure because the conditions prevailing in both the periods may differ.

2. To fix prices and formulate policies : Standard costing is helpful in determining prices and formulating production policies. The standards are set by studying all the existing conditions. It also helps to find out the prices of various products. It helps the management in the formulation of production and price policies in advance and also in the areas of profit planning product pricing, quoting prices of tenders. It also helps to furnish cost estimates while planning production of new products.

3. For Effective cost control : One of the most advantages of standard costing is that it helps in cost control. By comparing actual costs with the standard costs, variances are determined. These variances facilitate management to locate inefficiencies and to take remedial action against those inefficiencies at the earliest.

4. Management by exception : Management by exception means that each individual is fixed targets and every one is expected to achieve these given targets. Management need not supervise each and everything and need not bother if everything is going as per the targets. Management interferes only when there is deviation. Variances beyond a predetermined limit may be considered by the management for corrective action. The standard costing enables the management in determining responsibilities and facilitates the principle of management by exception.

5. Valuation of stocks : Under standard costing, stock is valued at standard cost and any difference between standard cost and actual cost is transferred to variance account. Therefore, it simplifies valuation of stock and reduces lot of clerical work to the minimum level.

 6. Cost consciousness : The emphasis under standard costing is more on cost variations which makes the entire organisation cost conscious. It makes the employees to recognise the importance of efficient operations so that efforts will be taken to reduce the costs to the minimum by collective efforts.

7. Provides incentives : Under standard costing system, men, material and machines can be used effectively and economies can be effected in addition to enhanced productivity. Schemes may be formulated to reward those who achieve targets. It increases efficiency, productivity and morale of the employees.

Limitations of Standard Costing

In spite of the above advantages, standard costing suffers from the following disadvantages:

1. Difficulty in setting standards : Setting standards is a very difficult task as it requires a lot of scientific analysis such as time study, motion study etc. When standards are set at high it may create frustration in the minds of workers. Therefore, setting of a correct standards is very difficult.

2. Not suitable to small business : The system of standard costing is not suitable to small business as it requires lot of scientific study which involves cost. Therefore, Small firms may find it very difficult to operate the system.

3. Not suitable to all industries : The standard costing is not suitable to those industries which produces non-standardised products and also not suitable to job or contract costing. Similarly, the application of standard costing is very difficult to those industries where production process takes place more than one accounting period.

4. Difficult to fix responsibility: Fixing responsibility is not an easy task. Variances are to be classified into controllable and uncontrollable variances because responsibility can be fixed only in the case of controllable variances. It is difficult to classify controllable and uncontrollable variances for the variance controllable at one situation may become uncontrollable at another time. Therefore, fixing responsibility is very difficult under standard costing.

5. Technological changes : Standard costing may not be suitable to those industries which are subject to frequent technological changes. When there is a change in the technology, production process will require a revision of standard. Frequent revision of standards is a costly affair and therefore, the system is not suitable for industries where methods and techniques of production are subject to fast changes.

In spite of the above limitations, standard costing is a very useful technique in cost control and performance evaluation. It is very useful tool to the industries producing standardised products which are repetitive in nature.

 

IGNOU : M.COM : MCO 5 : UNIT 11 : Q - 3. Give a comparative account of standard costing and budgeting.

Ans. 

	Standard costing	Budgeting
1	Standard costing is based on technical information and is fixed scientifically.	It is based on standard cost, historical costs and estimates.
2	Standard costs are used mainly for the manufacturing function and also for marketing and administration functions. Therefore, it does not require functional coordination.	Budgets are prepared for different functional departments such as sales, purchase, production, finance, personnel department. Therefore, it requires functional coordination.
3	Standard costs emphasises the cost levels which should be reduced	Budgets emphasises cost levels which should not be exceeded.
4	In standard costing variances are usually revealed through accounts.	In Budgeting, variances are not revealed through accounts and control in exercised by putting budgeted figures and actuals side by side.
5	In standard costing, a detailed analysis is needed in case of variances.	No further analysis is required if costs are within the budget.
6	Standard costing sets realistic yardsticks and therefore, it is more useful for controlling and reducing costs.	Budgets generally set maximum limits of expenditure without considering the effectiveness of expenditure.
7	Standard cost is revised only when there is a change in the basic assumptions and basis.	Budgeting is done before the beginning of each accounting period.
8	Budgeting is done before the beginning of each accounting period.	Budgets are set on the basis of present level of efficiency.

 

IGNOU : M.COM : MCO 5 : UNIT 11 : Q - 2. What is Standard Costing ? State the objectives of standard costing.

Ans. Standard costing is a technique used for the purpose of determining standard cost and their comparison with the actual costs to find out the causes of difference between the 3 two so that remedial action may be taken immediately. The Charted Institute of Management Accountants, London, defines standard costing as “the preparation of standard costs and applying them to measure the variations from actual costs and analysing the causes of variations with a view to maintain maximum efficiency in production”.

Objectives of Standard Costing :

1. Cost Control : The most important objective of standard cost is to help the management in cost control. It can be used as a yardstick against which actual costs can be compared to measure efficiency. The management can make comparison of actual costs with the standard costs at periodic intervals and take corrective action to maintain control over costs.

2. Management by Exception : The second objective of standard cost is to help the management in exercising control over the costs through the principle of exception. Standard cost helps to prescribe standards and the attention of the management is drawn only when the actual performance is deviated from the prescribed standards. It concentrates its attention on variations only.

3. Develops Cost Conscious Attitude : Another objective of standard cost is to make the entire organisation cost conscious. It makes the employees to recognise the importance of efficient operations so that costs can be reduced by joint efforts.

4. Fixation of Prices : To help the management in formulating production policy and helps in fixing the price quotations as well as in submitting tenders of various products. This can be done with accuracy with standard cost than the actual costs. It also helps in formulating production policies. Standard costs removes the reflection of abnormal price fluctuations in production planning.

5. Fixing Prices and Formulating Policies : Another object of standard cost is to help the management in determining prices and formulating production policies. It also helps the management in the areas of profit planning, product-pricing and inventory pricing etc.

6. Management Planning : Budget planning is undertaken by the management at different levels at periodic intervals to maximise the profit through different product mixes. For this purpose it is more convenient using standard costing than actual costs because it is done on scientific and rational manner by taking into account all technical aspects.

IGNOU : M.COM : MCO 5 : UNIT 11 : Q - 1. What is Estimating Costing and how does it differ from Standard Costing?

Ans. Estimates are predetermined costs which are based on historical data and is often not very scientifically determined. They usually compiled from loosely gathered information and therefore, they are unsafe to use them as a tool for measuring performance. Standard costs are predetermined costs which aims at what the cost should be rather then what it will be. Both the standard costs and estimated costs are used to determine price in advance and their purpose is to control cost.

But, there are certain differences between these two costs as stated below:

Standard costs	Estimated costs
Standard cost emphasizes as what the cost ‘should be’ in a given set of situations.	Estimated cost emphasizes on what the cost ‘will be’.
Standard costs are planned costs which are determined by technical experts after considering levels of efficiency and production	Estimated costs are determined by taking into consideration the historical data as the basis and adjusting it to future trends.
It is used as a devise for measuring efficiency	It cannot be used as a devise to determine efficiency. It only determines expected costs.
Standard costs serve the purpose of cost control	Estimated costs do not serve the purpose of cost control
Standard costing is part of cost accounting process	Estimated costs are statistical in nature and may not become a part of accounting.
It is a technique developed and recognised by management and academecians	It is just an estimate and not a technique
It can be used where standard costing is in operation	It may be used in any concern operating on a historical cost system.

IGNOU : M.COM : MCO 5 : UNIT 10 : Q - 4. What are the three important control ratios ? Explain them in brief.

Ans. BUDGETARY CONTROL RATIOS

Three important ratios are commonly used by the management to find out whether the deviations of actuals from budgeted results are favourable or otherwise. These ratios are expressed in terms of percentages. If the ratio is 100% or more, the trend is taken as favourable. The indication is taken as unfavourable if the ratio is less than 100. These ratios are:

1) Activity Ratio

2) Capacity Ratio

3) Efficiency Ratio Let us study these ratios in brief.

1) Activity Ratio

It is the measure of the level of activity attained over a period. It is obtained when the number of standard hours equivalent to the work produced are expressed as a percentage of the budgeted hours.

Activity Ratio =         Standard hours for actual production   × 100

                                                     Budgeted  hours

 

2) Capacity Ratio

This ratio indicates whether and to what extent budgeted hours of activity are actually utilised. It is the relationship between the actual number of working hours and maximum possible number of working hours in budget period.

 Capacity Ratio =           Actual hours worked   × 100

                                              Budgeted  hours

 

3) Efficiency Ratio

The ratio indicates the degree of efficiency attained in production. It is obtained when the standard hours equivalent to the work produced are expressed as a percentage of the actual hours spent in producing that work.

Efficiency Ratio  =           Standard hours for actual production    × 100

                                                            Actual hours worked

IGNOU : M.COM : MCO 5 : UNIT 10 : Q - 3. Explain Why is a variable costing format useful for performance evaluation?

 Ans. According to National Institute of Bank Management, performance budgeting technique is, “ the process of analyzing, identifying, simplifying and crystallizing specific performance objectives of a job to be achieved over a period, in the framework of the organizational objectives, the purpose and objectives of the job. The technique is characterized by its specific direction towards the business objectives of the organization.”

The main objectives of performance budgeting are :

i) to coordinate the physical and financial aspects,

ii) to improve the budget formulation, review and decision making at all levels of management,

iii) to facilitate better appreciation and review by controlling authorities as the presentation is more purposeful and intelligible,

iv) to make more effective performance audit possible, and

v) to measure progress towards long term objectives which are envisaged in a development plan.

Performance budgeting requires preparation of periodic performance reports. Such reports compare budget and actual data, and show variances. Their preparation is greatly facilitated if the authority and responsibility for the incurence of each cost element is clearly defined within the firm’s organisational structure. The responsibility for preparing the performance budget of each department lies on the respective department head. Periodic reports from various sections of a department will be required by the departmental head who will submit a summary report about his department to the budget committee. The report will be in the form of comparison of budgeted and actual figures both periodic and cumulative. The purpose of preparing these reports is to promptly inform about the deviations in actual and budgeted activity to the person who has the necessary authority and responsibility to take necessary action to correct the deviations from the budget.

Thus, performance budgeting lays immediate stress on the achievement of specific goals over a period of time. However, in the long-run it aims at continuous growth of the organisation so that it continues to meet the dynamic needs of its growing clientele. It enables the organisation to be sensitive and adaptive, preventing it from developing rigidities which may retard the process of growth.

A comparison of the master budget with the flexible budget and with actual results forms the basis for analyzing difference between plans and actual performance. The difference between operating profits in the master budget and operating profits in the flexible budget is called an activity variance. When the change from the master budget to the flexible budget is due to changes in sales volume, the activity variance is known as the sales volume variance. The variance may be favourable or unfavourable variance.

IGNOU : M.COM : MCO 5 : UNIT 10 : Q - 2. What do you understand by zero base budgeting ? How is it different from traditional budgeting?

Ans. ZERO BASED BUDGETING (ZBB)

The technique of zero based budgeting suggests that an organisation should not only make decisions about the proposed new programmes but it should also, from time to time, review the appropriateness of the existing programmes. Such review should particularly done of such responsibility centres where there is relatively high proportion of discretionary costs.

Zero based budgeting, as the term suggests, examines a programme or function or responsibility from “ scratch.” The reviewer proceeds on the assumption that nothing is to be allowed. The manger proposing the activity has, therefore, to prove that the activity is essential and the various amounts asked for are reasonable taking into account the volume of activity. Nothing is allowed simply because it was being done or allowed in the past. Thus, it means writing on a clean slate.

Peter A. Pyhrr defined the zero based budgeting as “an operating planning and budgeting process which requires each manager to justify his entire budget requests in detail from scratch (hence zero basis). Each manager states why he should spend any money at all. This approach requires that all activities be identified as decision packages which would be evaluated by systematic analysis ranked in order of importance.

Thus, a cost-benefit analysis is done in respect of every function or process. It has to be justified while framing budgets. The assumption underlying zero base budgeting is that the budget for the previous period was zero, therefore whatever costs are likely to be incurred or spending programmes are chalked out, justification or the full amount is to be given. Under conventional system of budgeting, however, the justification is to be submitted by the manager only in respect of the increase in the demand for allotment of funds in excess over the budget for the previous period. Thus, instead of functionally-oriented spending approach, programme-oriented and decision-oriented approach is followed under zero based budgeting.

 

IGNOU : M.COM : MCO 5 : UNIT 10 : Q - 1. What are fixed and flexible budgets? Differentiate between these two.

Ans. FIXED BUDGETING

According to C.I.M.A., London, “a fixed budget is a budget which is designed to remain unchanged irrespective of the level of activity actually attained.” Thus, a budget prepared on the basis of a standard or fixed level of activity is known as a fixed budget. It does not change with the change in the level of activity. Therefore, it becomes an unrealistic yardstick in case the level of activity actually attained does not confirm to the one assumed for budgeting purposes. The management will not be in a position to assess the performance of different heads on the basis of budgets prepared by them because they can serve as yardsticks only when the actual level of activity corresponds to the budgeted level of activity. Fixed budget is useful when there is no significant variation between the budgeted output and the actual output. It does not consider variances due to changes in the volume. In the industries where the pattern of demand is stable a fixed budget may be adequate, especially where the budget period is comparatively short. In such concerns it is possible to forecast sales with a considerable degree of accuracy.

FLEXIBLE BUDGETING

Flexible budget, also known as variable or sliding sale budget, is a budget which is designed to furnish budgeted costs for any level of activity actually attained. Flexible budgeting technique may be employed to adjust other budgets according to current conditions arising out of seasonal variations or changes in the length of the working period etc.

According to C.I.M.A., London, “a flexible budget is a budget designed to change in accordance with the level of activity actually attained.” Thus, a budget prepared in a manner so as to give the budgeted cost for any level of activity is known as a flexible budget. Such a budget is prepared after considering the fixed and variable elements of cost and the changes that may be expected for each item at various levels of operations.

DIFFERENCE BETWEEN FIXED AND FLEXIBLE BUDGETING

The differences can be outlined as follows:

1) Fixed budgeting is inflexible and remains the same irrespective of the volume of business activity, whereas flexible budgeting can be suitably recast quickly to suit changed conditions.

2) Fixed budgeting assumes that conditions would remain static, whereas, flexible budgeting is designed to change according to a change in the level of activity.

3) Under fixed budgeting, costs are not classified according to fixed, variable and semi-variable, while, under flexible budgeting, costs are classified according to nature of their variability.

4) Under fixed budgeting, actual and budgeted performances can’t be correctly compared if the volume of output differs, while under flexible budgeting, comparisons are realistic since the changed plan figures are placed against actual ones.

5) Under fixed budgeting, cost cannot be ascertained if there is a change in the circumstances, while, under flexible budgeting, costs can easily be ascertained at different levels of activity. The task of fixing prices becomes smooth.

IGNOU : M.COM : MCO 5 : UNIT 9 : Q - 4. What is a Master Budget ? What are its Components ?

Ans. MASTER BUDGET

Master Budget is a combination of all other budgets prepared for a specific period. It shows the overall budget plan. All the budgets are coordinated into one harmonious unit.

According to Rowland and William H. Harr, “Master Budget is a summary of the budget schedules in capsule form made for the purpose of presenting in one report the highlights of the budget forecast.” Thus, Master Budget sets out the plan of operations for all departments in considerable detail for the budget period. The budget may take the form of a Profit and Loss Account and a Balance Sheet as at the end of the budget period.

The budget generally contains details regarding sales (net), production costs, cash position, and key account balances like debtors, fixed assets, bills payable, etc. It also shows the gross and the net profits and the important accounting ratios. It is prepared by the Budget Officer and it requires the approval of the Budget Committee before it is put into operation. If approved, it is submitted to the Board of Directors for final approval. The Board may make certain alterations if necessary before it is finally approved.

IGNOU : M.COM : MCO 5 : UNIT 9 : Q - 3. What is a Cash Budget ? How is it prepared ?

Ans. CASH BUDGET

A Cash Budget is a summary statement of the firms’ expected cash inflows and outflows over a projected time period. In other words, cash budget involves a projection of future cash receipts and cash disbursements over various time intervals.

While preparing cash budget seasonal factors must be taken into account and in practice cash budget is prepared on a monthly basis. The availability of other budgets is tested in terms of cash availability. Cash budget is also called as cash flow statement which indicates cash inflow and cash outflows. It is generally prepared for a maximum period of one year.

A cash budget helps the management in (i) determining the future cash needs of the firm, (ii) planning for financing of the needs; (iii) exercising control over cash and liquidity of the firm.

The overall objective of a cash budget is to enable the firm to meet all its commitments in time and at the same time prevent accumulations of unnecessary large balance with it.

Methods of Preparing Cash Budgets

There are basically three methods for preparing cash budgets.

1) Receipts and Payments Method

2) Adjusted Profit and Loss Account Method

3) Balance Sheet Method Let us study about these methods in brief.

1) Receipts and Payments Method

Under this method, all receipts are added and out of the total, the sum of all payments is deducted to arrive at the balance in hand. The closing balance in hand say, for a particular month is the opening balance of the next month and is added to the total of receipts so as to know the total availability of cash during the month. The receipts and payments during the budget period are found out from various functional budgets prepared. The credit allowed to debtors, the credit allowed to us by suppliers, the delay in payment of wages and other expenses etc. are the factors, which are taken into account to determine the timing of receipts and payments. Advance payments and receipts are to be included but the payment in abeyance and income accrued on outstanding are excluded from cash budget. Revenue as well as capital receipts and payments are recorded in cash budget.

2) Adjusted Profit and Loss Account Method

The budgeting done by Adjusted Profit and Loss account method is known as cash flow statement and is more suitable for long-term forecasting. Under this method profit is taken as equivalent to cash and necessary adjustments are done in respect of non-cash transactions. The net estimated profit is taken as the base and non-cash items like depreciation, outstanding expenses, provisions etc. already deducted to arrive at the net profit are added back. The capital receipts, reduction in debtors, stocks, increase in liabilities, issue of share capital and debentures are other items which are added to compute the total cash receipts. The payments of dividends, prepayments, capital payments, increase in debtors, increase in stock and decrease in liabilities are deducted out of the total cash receipts. The profit adjusted this way denotes the estimated cash available.

3) Balance Sheet Method Under this method

at the end of budget period a projected balance sheet is drawn up setting out the various assets and liabilities, except cash and bank balances. The balancing figure would be the estimated closing cash/bank balance. Thus, under this method, closing balances other than cash/bank will have to be found out first to be put in the budgeted balance sheet. This can be done by adjusting the anticipated transaction of the year in the opening balances. If the liabilities are more than assets, this reveals a balance of cash/bank and if assets exceed liabilities, it reveals a bank overdraft. Thus, under Adjusted Profit and Loss method, the amount of cash is computed by preparing a Cash Flow Statement and the same amount is computed as a balancing figure under Balance Sheet method.

IGNOU : M.COM : MCO 5 : UNIT 9 : Q - 2. Write short notes on the following : i) Sales Budget ii) Material Budget iii) Production Cost Budget iv) Overhead Budget

Ans. 

i) Sales Budget

The sales budget is usually the keystone in planning and control of operation of a business. Sales forecast serves as a base for the sales budget. The sales budget is prepared in quantitative terms of units expected to be sold and the value expected to be realised. The Sales Manager should be made directly responsible for the preparation and execution of sales budget. This is prepared according to the requirements of the business while preparing sales budget. The useful classification may be-products, territories, customers, salesmen, etc. More than one classification may be employed. However, at the time of preparing sales budget the following factors should be kept in mind:

(a) salesmen’s estimates (b) orders in hand (c) Past behaviour (d) Management policies for future (e) seasonal fluctuations (f) availability of materials (g) plant capacity (h) availability of finance (i) potential market (j) level of competition (k) position of competitors, etc.

ii) Material Budget 

Materials are either direct or indirect. The Material budget generally deals only with the direct materials. Indirect materials are generally included in overhead budget. The material requirements are estimated on the basis of quantity of each class of products to be produced by multiplying the exact material requirement for each class of product by the number of units of that class. Material budget can be prepared on the basis of standards or, historical data regarding percentage of raw materials to total cost, adjusted for current price and normal wastage of material. The factors to be considered while preparing the Material Budget are : the quantity of material required for the production budget, tentative dates by which required material must be available, the availability of storage facilities as well as credit facilities, price trends in the market, nature of the materials required etc. Only direct materials are to be taken into account and indirect materials are not taken into account as they are considered under overheads budget. The material budget helps the management for proper planning of purchases. The object of the budget is to ensure the availability of adequate quantities of materials as and when required. It will be included in the Master Budget after the approval of Budget Committee.

iii) PRODUCTION COST BUDGET

This budget is a forecast of the cost of production which has been planned in the production budget. The production budget is prepared in terms of quantity to be produced. The amount is shown in this budget. The total cost of production is arrived at by adding the cost of materials, labour and manufacturing overheads. The quantity of material, the time taken by labour and the estimated costs of material, labour and expenses- all can be shown as part of production cost budget also.

iv) Overhead Budget 

The overheads budget should be prepared in three parts as follows :

1) Manufacturing Overhead Budget

2) Administration Overhead Budget, and

3) Selling and Distribution Overhead Budget.

Manufacturing Overhead Budget

The budget is an estimate of the manufacturing overhead costs to be incurred in the budget period to achieve the targeted production. Manufacturing overheads include indirect material, indirect labour, and indirect expenses related to the factory. The cost of each and every item of these three components of manufacturing overhead is separately estimated as per the requirements of production. 3

Administration Overhead Budget

Administration overhead includes the costs of framing policies, directing the organisation and controlling the business operations. Most of the administration expenses are normally unconnected with the volume of activity, therefore, experience and anticipated changes in conditions are the guides for the preparation of this budget.

Selling and Distribution Overhead Budget

The budget includes all expenses relating to selling, advertising, delivery of goods to customers, etc. The overheads may be determined on the basis of sales targets being allocated to different territories or salesman etc. Those expenses which generally vary with the sales quantity are estimated on sales basis, others which are of a fixed nature, are estimated on the basis of past experience and anticipated changes. The responsibility for the preparation of this budget lies with the executives of the sales departments.