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, 12,000 for the Plushette, and 5,000 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: a. Salaries for his office (including himself at $65,000, a marketing research assistant at $40,000, and an administrative assistant at $25,000) are budgeted for $130,000 next year. b. Depreciation on the offices and equipment is $20,000 per year. c. Office supplies and other expenses total $21,000 per year. d. Advertising has been steady at $20,000 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. e. Commissions on the Sleepeze and Plushette lines are 5 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 $50 per unit sold. Gene expects the Ultima line to ship for $75 per unit sold since this model features a larger mattress. Required: 1. Suppose that Gene is considering three sales scenarios as follows: Pessimistic Expected Optimistic Price Quantity Price Quantity Price Quantity Sleepeze Plushette $ 200 S 200 18,000 S180 12,500 15,000 300 10,000 2,000 350 12,000 5,000 360 14,000 Ultima 900 1,000 1,200 5,000 Prepare a revenue budget for the Sales Division for the coming year for each scenario. 2. Prepare a flexible expense budget for the Sales Division for the three scenarios above.
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, 12,000 for the Plushette, and 5,000 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: a. Salaries for his office (including himself at $65,000, a marketing research assistant at $40,000, and an administrative assistant at $25,000) are budgeted for $130,000 next year. b. Depreciation on the offices and equipment is $20,000 per year. c. Office supplies and other expenses total $21,000 per year. d. Advertising has been steady at $20,000 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. e. Commissions on the Sleepeze and Plushette lines are 5 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 $50 per unit sold. Gene expects the Ultima line to ship for $75 per unit sold since this model features a larger mattress. Required: 1. Suppose that Gene is considering three sales scenarios as follows: Pessimistic Expected Optimistic Price Quantity Price Quantity Price Quantity Sleepeze Plushette $ 200 S 200 18,000 S180 12,500 15,000 300 10,000 2,000 350 12,000 5,000 360 14,000 Ultima 900 1,000 1,200 5,000 Prepare a revenue budget for the Sales Division for the coming year for each scenario. 2. Prepare a flexible expense budget for the Sales Division for the three scenarios above.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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, 12,000 for the Plushette,
and 5,000 for the Ultima. Gene Dixon, vice president of sales, has provided the following
information:
a. Salaries for his office (including himself at $65,000, a marketing research assistant at
$40,000, and an administrative assistant at $25,000) are budgeted for $130,000 next year.
b. Depreciation on the offices and equipment is $20,000 per year.
c. Office supplies and other expenses total $21,000 per year.
d. Advertising has been steady at $20,000 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.
e. Commissions on the Sleepeze and Plushette lines are 5 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 $50 per unit sold. Gene
expects the Ultima line to ship for $75 per unit sold since this model features a larger
mattress.
Required:
1. Suppose that Gene is considering three sales scenarios as follows:
Pessimistic
Expected
Optimistic
Price
Quantity
Price
Quantity
Price
Quantity
Sleepeze
Plushette
$ 200
S 200
18,000
S180
12,500
15,000
300
10,000
2,000
350
12,000
5,000
360
14,000
Ultima
900
1,000
1,200
5,000
Prepare a revenue budget for the Sales Division for the coming year for each scenario.
2. Prepare a flexible expense budget for the Sales Division for the three scenarios above.
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