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Comprehensive Case Tizer Pharmaceuticals Tizer Pharmaceuticals has an annual budget preparation and review pro- cess that begins on November 1. At that time the finance department instructs all departments to prepare their budgets for the upcoming year, which would start on January 1. Normally, units are expected to plan for modest growth in sales and production activity based on the growth in the economy in general and the province's health care budget in particular. Hazel Coleman is Human Resource Manager at Tizer Pharmaceuticals She prepared the following budget: Tizer Pharmaceuticals Human Resources Department Budget for the Year Cost line Cost Driver Manager's salary Manager Employees' salaries # Human resource employees Total salaries Salary related costs 15% of salaries Travel & interview costs # interviews Position advertising # new positions Office expenses Centrally allocated cost Miscellaneous Total $ 80,000 400,000 $480,000 72,000 100,000 50,000 100,000 50,000 $852,000 It is mid-December. Hazel has just received the following email from the finance department: Bad news, we are sorry to tell you. A strategic analysis of the market has indicated that we have an unexpected problem. Changes in the North American Free Trade Agreement have resulted in greater competition being expected from our neigh- bours south of the border. Instead of our usual growth of between 2% and 5%, we are now anticipating a 10% shrinkage in our sales. All departments will please submit revised budgets, bearing in mind the following: An overall cut of 20% must be made to all budget totals. Plan to reduce your departmental head count by at least 10%. Employ. ees should be let go on last-in, first-out basis. There will be no new hiring in any unit for the next 6 months. As Hazel, how would you respond to the proposed budget cut

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