[SOLVED] Peters Corporation operates on a calendar-year

Peters Corporation operates on a calendar-year basis. It begins the annual budgeting process in late August when the president sets targets for the total dollar sales and net income before taxes for the next year.
The sales target is given first to the marketing department. The marketing manager creates a sales budget for each product line in both units and dollars. From this budget, he determines sales quotas by product line in units and dollars for each of the corporation's sales districts. The marketing manager also estimates the cost of the marketing activities that will be needed to support the target sales volume, and he prepares a tentative marketing expense budget.
The executive vice-president uses the sales and profit targets, the sales budget by product line, and the tentative marketing expense budget to determine the dollar amounts that can be used for manufacturing and corporate office expenses. The executive vice-president prepares the budget for corporate expenses. She then forwards to the production department the product-line sales budget in units and the total dollar amount that it can use for manufacturing.
The production manager meets with the factory managers to develop a manufacturing plan that will produce the required units when they are needed, and within the cost set by the executive vice-president. The budgeting process usually falters at this point because the production department does not believe that it has been given enough financial resources.
When this standstill occurs, the vice-president of finance, the executive vicepresident, the marketing manager, and the production manager meet to determine the final budgets for each of the areas. This normally results in a modest increase in the total amount that is available for manufacturing costs and cuts to the marketing expense and corporate office expense budgets. The total sales and net income figures proposed by the president are almost never changed. Although the participants are usually unhappy about the compromise, these budgets are final. Each executive then develops a new detailed budget for the operations in his or her area.
None of the areas has achieved its budget in recent years. Sales often run below the target. When budgeted sales are not achieved, each area is expected to cut costs so that the president's profit target can be met.
However, the profit target is almost never met because the areas don't cut costs enough. In fact, costs often run above the original budget in all functional areas (marketing, production, and corporate office).
The president is disturbed that Peters Corporation has not been able to meet its sales and profit targets. He therefore hired a consultant with considerable experience with companies in Peters's industry. The consultant reviewed ……………………………….

Instructions
a. Discuss how the budgeting process used by Peters Corporation makes failing to achieve the president's sales and profit targets more likely.
b. Suggest how Peters Corporation's budgeting process could be revised to correct the problems.
c. Should the functional areas be expected to cut their costs when the sales volume falls below the budget forecast? Explain.

Question: Peters Corporation operates on a calendar-year

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