Posted: April 18th, 2016

Which budget helped you most in answering number 1??

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A recent directive from Sandy Jensen, CEO of Duluth Manufacturing, had instructed each department to cut its costs by 10%. The traditional functional budget for the shipping and receiving department was as follows:
Salaries, four employees at $42,000 $168,000
Benefits at 20% 33,600
Depreciation, straight-line basis 76,000
Supplies 43,400
Overhead at 35% of direct costs 112,350
Total $433,350
Therefore, the shipping and receiving department needed to find $43,335 to cut. June Steele, a recent MBA graduate, was asked to pare $43,335 from the shipping and receiving department’s budget. As a first step, she recast the traditional budget into an activity-based budget.
Receiving 620,000 pounds $93,000
Shipping, 404,000 boxes 202,000
Handling, 11,200 moves 112,000
Record keeping, 65,000 transactions 26,350
Total $433,350

1. What actions might Steele suggest to attain a $43,335 budget cut? Why would these be the best actions to pursue?
2. Which budget helped you most in answering number 1? Explain.