Q:  What happens if I spend more than the budget amount allocated to my firm?
A: Top management monitors spending by each department.  If you exceed your budget, expenses must be cut back somewhere.  There usually isn’t time to come back and ask a manager who has disregarded a budget limit how to change the plan.  For example, the president must go ahead and make arrangements to have products designed and produced.  Of course, some ways of cutting the budget probably don’t make sense; for example, firing sales reps at the last minute is disruptive.  But, you should assume that spending will be cut!
      An exception to this occurs if the president announces that marketing department has been granted a discretionary budget reserve fund.   If a firm has control of a reserve fund, then the amount of spending over budget will be drawn from the fund until it is depleted. 

 Q:  Does the firm have to spend the full budget amount? If I don’t spend it now, can I save it and use it later?
A:    No, it isn’t necessary to spend the full budget amount—but you can’t save it and use it in a later period.  Spending on marketing activities is a two-edged sword.  First, whatever you don’t spend  doesn’t appear as an expense—so if you achieve the same revenues with lower expenses profit contribution will be higher.  However, you should also consider the possible gains from increased sales revenues as a result of spending the full budget amount.  If you believe that the benefits of increased spending outweigh the costs, then it makes more sense to spend all of your budget.  Usually, the president gives you a budget with the intention that you’ll spend it carefully and in such a way that it will help the firm earn profit, so usually you’ll want to spend the budget that is allocated to you.  If you decide not to spend all of your budget for a particular period, the remaining amount cannot be saved for future periods.  Rather, your future budgets will depend on your future performance.

 Q: How can I tell is there is money in my discretionary reserve fund?
A: Check your firm's income statement from the most recent period. Towards the bottom of the report, if there is a reserve fund you will see a line labeled, "Remaining Reserve Funds." This amount is  the balance in your discretionary reserve fund.
      There is one exception to this rule.  If the president decides to increase the discretionary fund for subsequent periods (say, to give the marketing manager more flexibility about introducing a new product, as might be the case at Level 3), the change in discretionary funds granted for the next period is not reflected in the report for the previous period.  In this sort of situation you need to know what the president has communicated on the matter.

Q: How is the "Interest Income" on my income statement calculated?

A: Any funds in your discretionary reserve fund that are unused at the end of a period earn interest (at 6% per period). This income is added to the firm's net contribution.