Activity-Based BudgetOlympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,060 for the Sleepeze, 11,710 for the Plushette, and 4,660 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:Salaries for his office (including himself at $67,550, a marketing research assistant at $37,450, and an administrative assistant at $24,850) are budgeted for $129,850 next year.Depreciation on the offices and equipment is $18,100 per year.Office supplies and other expenses total $22,800 per year.Advertising has been steady at $21,850 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 spend 15 percent of first-year Ultima sales for a print and television campaign.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.Last year, shipping for the Sleepeze and Plushette lines averaged $50 per unit sold. Gene expects the Ultima line to ship for $75 per unit sold since this model features a larger mattress.Suppose that Gene is considering three sales scenarios as follows: PessimisticExpectedOptimisticPrice Quantity Price Quantity Price QuantitySleepeze$18612,500$20115,060$20117,850Plushette2999,65034411,71035214,030Ultima8502,1209604,6601,1904,660Suppose Gene determines that next year's Sales Division activities include the following:Research-researching current and future conditions in the industryShipping-arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errorsJobbers-coordinating the efforts of the independent jobbers who sell the mattressesBasic ads-placing print and television ads for the Sleepeze and Plushette linesUltima ads-choosing and working with the advertising agency on the Ultima accountOffice management-operating the Sales Division officeThe percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table:ResearchAdministrativeGeneAssistantAssistantResearch70%Shipping25%15%Jobbers201525Basic ads1535Ultima ads30Office management2520Additional information is as follows:a. Depreciation on the office equipment belongs to the office management activity.b. Of the $22,800 for office supplies and other expenses, $4,500 can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional $3,000 per year is attributable to Internet connections andfees, and the bulk of these costs (85 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 BudgetFor Next YearResearch:Shipping:Jobbers:Basic ads:Ultima ads:Office management:Total

It is a budget that records, analyses and research each activity that contributes to the cost of the…

Answered: Olympus, Inc., manufactures three…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Activity-Based Budget

Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,060 for the Sleepeze, 11,710 for the Plushette, and 4,660 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

Salaries for his office (including himself at $67,550, a marketing research assistant at $37,450, and an administrative assistant at $24,850) are budgeted for $129,850 next year.
Depreciation on the offices and equipment is $18,100 per year.
Office supplies and other expenses total $22,800 per year.
Advertising has been steady at $21,850 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 spend 15 percent of first-year Ultima sales for a print and television campaign.
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.
Last year, shipping for the Sleepeze and Plushette lines averaged $50 per unit sold. Gene expects the Ultima line to ship for $75 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 Price Quantity
Sleepeze
$186
12,500
$201
15,060
$201
17,850
Plushette
299
9,650
344
11,710
352
14,030
Ultima
850
2,120
960
4,660
1,190
4,660
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
Administrative
Gene
Assistant
Assistant
Research
70%
Shipping
25%
15%
Jobbers
20
15
25
Basic ads
15
35
Ultima ads
30
Office management
25
20
Additional information is as follows:
a. Depreciation on the office equipment belongs to the office management activity.
b. Of the $22,800 for office supplies and other expenses, $4,500 can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional $3,000 per year is attributable to Internet connections and
fees, and the bulk of these costs (85 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
Research:
Shipping:
Jobbers:
Basic ads:
Ultima ads:
Office management:
Total

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.