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PROBLEM 10-14. Budgeting Process [LO 3] Debra Green is the division manager of the Consumer...

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Accounting

PROBLEM 10-14. Budgeting Process [LO 3] Debra Green is the division manager of the Consumer Banking Division of Pennywise Bank. Each year Debra submits an annual budget to Barney Stringer, the banks chief financial officer. Debras bonus, salary increases, and promotion opportunities are based on how her performance compares with budgeted divisional income. Debra has to negotiate the budget with the CFO each year.

In the past, Barney has insisted that Debra underestimated revenue and overestimated expenses, whereas Debra tells Barney that he is expecting too much from her division.

During 2017, the Consumer Banking Division had a record year, and Debra received a huge bonus. For 2018, Barney insisted that Debras budget be at least equal to the prior years per- formance level. Debra stated that the prior year was exceptional and performance could not be repeated. After getting into a rather heated argument, they scheduled a meeting with the president and CEO of the bank to resolve their conflict.

REQUIRED

a. Explain why Barney and Debra have conflicting opinions. b. If you were the president of Pennywise Bank, how would you resolve the argument between Barney and Debra?

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