Assumptions: Helps to predict the future must be continually updated increase in selling price -> there is a high degree of competition, profit plan is in doubt decline in sales volume hurting overall profits Alternatives

Assumptions:

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  Helps to predict the future
  
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  must be continually updated
  

increase in selling price -> there is a high degree of competition,

• 
  profit plan is in doubt
  
• 
  decline in sales volume
  
• 
  hurting overall profits
  

Alternatives

Some of the sales manager’s options are:

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  Modify advertising and sales promotion.
  
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  Change the method of distribution.
  
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  Eliminate unprofitable products.
  
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  Develop new markets and products.
  
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  Combine small orders to reduce transportation charges.
  
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  Redesign truck routes to economize on fuel.
  
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  Change the sales territory.
  
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  Alter the selling price.
  
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  Change credit and collection policies.
  
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  Alter packaging and labeling.
  

The production manager is responsible for:

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  Improve the production process and supervision of workers.
  
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  Change the repair and maintenance policy.
  
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  Move production elements (e.g., machinery) or entire facilities.
  
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  Use higher-technology equipment.
  
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  Determine the best production run.
  
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  Properly schedule work flow and employee time.
  
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  Synchronize production and inventory levels.
  
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  Reduce fixed costs.
  

The purchasing manager should:

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  Carefully inspect the quality of purchased items.
  
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  Decrease the days that elapse between purchase and delivery.
  
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  Decide on less expensive product substitutes.
  
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  Obtain volume discounts from larger orders.
  
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  Reduce inventory cost with more frequent deliveries.
  
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  Emphasize standardized (uniform) items.
  
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  Change unreliable suppliers.
  

The personnel manager can:

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  Expand job training.
  
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  Improve recruitment.
  
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  Establish merit increases based on performance.
  
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  Select the right person for the right job.
  

Responsibility
Responsibility without authority causes the profit planning system to fail and results in manager frustration.

A solution is to make nonfinancial managers jointly responsible for an objective that affects both. Interrelated departments must work as a group to maximize company profit by considering the net advantage or disadvantage to the business. The managers should share credit or blame for these interrelated performances. In this way, managers will work toward meeting overall company objectives.

Participation

Line managers are concerned with operating and executing plans.

Staff managers assist others in an advisory capacity.

the accountant or financial executive can prepare meaningful budget information

performance reports that can be used by nonfinancial managers.

Nonfinancial managers should communicate clearly to financial managers the type and nature of information they need.