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Chapter 6 Stamp-It Solution

Chapter 6 Stamp-It Solution - Solution to Stamp-It problem...

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Solution to “Stamp-It” problem: Main characteristic of the system: SI’s sales budgeting system is essentially a top-down approach. Senior management forecasts total sales and unit prices at the firm-wide level and distributes this plan to the divisions, and then to the regions, and finally to the individual salespeople. The total projected sales cascades down through the sales force based on historical sales patterns. This budgeting procedure does not provide for the assembling of knowledge from lower levels in the firm, namely the sales force. They are not asked how many 6103s each can sell. They are told how many they will sell. Main Advantages of this budgeting system: 1. As SI’s sales budgeting system is essentially a top-down approach, there is no problem of “Budgetary Slack”. This system solves the problem of salespeople under-forecasting sales to more easily meet their sales quotas. 2. SI is using the budget targets to provide bonus. This compensation system motivates the sales force to perform better.
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