Budgeting Basics and Beyond

5.6. Alternatives

The financial impact of alternatives in the profit plan has to be considered. Alternative plans can allow for such possibilities as a strike. The alternative selected should be practical and result in the highest profit in conformity with the nonfinancial manager's goals. The bottom line, and not the personal tastes of the manager, is all that counts. For example, the sales manager may prefer to sell through direct mail, but he or she should use the manufacturer's representatives if that is more profitable.

The sales manager should try to obtain the most profitable sales at the minimum cost. Some of the sales manager's options are:

• Modify advertising and sales promotion.

• Change the method of distribution.

• Eliminate unprofitable products.

• Develop new markets and products.

• Combine small orders to reduce transportation charges.

• Redesign truck routes to economize on fuel.

• Change the sales territory.

• Alter the selling price.

• Change credit and collection policies.

• Alter packaging and labeling.

The production manager is responsible for manufacturing sufficient quantities to meet sales needs at the lowest practical cost while maintaining quality within a desired time period.

• Improve the production process and supervision of workers.

• Change the repair and maintenance policy.

• Move production elements (e.g., machinery) or entire facilities.

• Use higher-technology equipment.

• Determine the best production run.

• Properly schedule work flow and employee time.

• Synchronize production and inventory ...