Activity-Based Budget Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,000 for the Sleepeze, 11,970 for the Plushette, and 4,910 for the Ultima. Gene Dixon, vice presid sales, has provided the following information: a. Salaries for his office (including himself at $67,200, a marketing research assistant at $40,650, and an administrative assistant at $24,500) are budgeted for $132,350 next year. b. Depreciation on the offices and equipment is $22,900 per year. c. Office supplies and other expenses total $22,150 per year. d. Advertising has been steady at $22,500 per year. However, the Ultima is a new product and will require extensive advertising to educate consumers on the unique features of this high-end mattress. Gene believes the company should percent of first-year Ultima sales for a print and television campaign. e. Commissions on the Sleepeze and Plushette lines are 4 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores. f. Last year, shipping for the Sleepeze and Plushette lines averaged $45 per unit sold. Gene expects the Ultima line to ship for $70 per unit sold since this model features a larger mattress. Suppose that Gene is considering three sales scenarios as follows: Pessimistic Expected Optimistic Price Quantity Price Quantity $194 15,000 $194 18,400 Price Quantity Sleepeze $172 12,370 Plushette 297 9,590 Ultima 357 11,970 366 13,970 860 2,220 960 4,910 1,150 4,910 Suppose Gene determines that next year's Sales Division activities include the following: Research-researching current and future conditions in the industry Shipping-arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors Jobbers-coordinating the efforts of the independent jobbers who sell the mattresses Basic ads-placing print and television ads for the Sleepeze and Plushette lines Ultima ads-choosing and working with the advertising agency on the Ultima account Office management-operating the Sales Division office The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table: Research Assistant 70% Research Shipping Gene 35% Administrative Assistant 20%

Activity-Based Budget Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,000 for the Sleepeze, 11,970 for the Plushette, and 4,910 for the Ultima. Gene Dixon, vice presid sales, has provided the following information: a. Salaries for his office (including himself at $67,200, a marketing research assistant at $40,650, and an administrative assistant at $24,500) are budgeted for $132,350 next year. b. Depreciation on the offices and equipment is $22,900 per year. c. Office supplies and other expenses total $22,150 per year. d. Advertising has been steady at $22,500 per year. However, the Ultima is a new product and will require extensive advertising to educate consumers on the unique features of this high-end mattress. Gene believes the company should percent of first-year Ultima sales for a print and television campaign. e. Commissions on the Sleepeze and Plushette lines are 4 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores. f. Last year, shipping for the Sleepeze and Plushette lines averaged $45 per unit sold. Gene expects the Ultima line to ship for $70 per unit sold since this model features a larger mattress. Suppose that Gene is considering three sales scenarios as follows: Pessimistic Expected Optimistic Price Quantity Price Quantity $194 15,000 $194 18,400 Price Quantity Sleepeze $172 12,370 Plushette 297 9,590 Ultima 357 11,970 366 13,970 860 2,220 960 4,910 1,150 4,910 Suppose Gene determines that next year's Sales Division activities include the following: Research-researching current and future conditions in the industry Shipping-arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors Jobbers-coordinating the efforts of the independent jobbers who sell the mattresses Basic ads-placing print and television ads for the Sleepeze and Plushette lines Ultima ads-choosing and working with the advertising agency on the Ultima account Office management-operating the Sales Division office The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table: Research Assistant 70% Research Shipping Gene 35% Administrative Assistant 20%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Activity-Based Budget

The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table:
Research
Assistant
70%
Research
Shipping
Jobbers
Basic ads
Ultima ads
Office management
Research:
Gene
Shipping:
35%
20
Jobbers:
30
15
Additional information is as follows:
a. Depreciation on the office equipment belongs to the office management activity.
b. Of the $22,150 for office supplies and other expenses, $5,500 can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional $2,200 per year is attributable to Internet connections and
fees, and the bulk of these costs (75 percent) are assignable to research. The remainder is a cost of office management. All other office supplies and costs are assigned to the office management activity.
Required:
1. Prepare an activity-based budget for next year by activity. Use the expected level of sales activity. If required, round answers to the nearest dollar.
Olympus, Inc.
Activity-Based Budget
For Next Year
15
15
QO000 Qo
Administrative
Assistant
$
20%
20
40
10
10

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