Capstone Corporation has just received its sales expense report for January, which follows.
Item Amount
Sales commissions . . . . . . . . . . . . . $607,500
Sales staff salaries . . . . . . . . . . . . . 144,000
Telephone and mailing . . . . . . . . . . 72,900
Building lease payment. . . . . . . . . . 90,000
Utilities . . . . . . . . . . . . . . . . . . . . . . 18,450
Packaging and delivery. . . . . . . . . . 123,300
Depreciation . . . . . . . . . . . . . . . . . . 56,250
Marketing consultants . . . . . . . . . . . 88,650
You have been asked to develop budgeted costs for the coming year. Because this month is typical, you decide to prepare an estimated budget for a typical month in the coming year and you uncover the following additional data:
• Sales volume is expected to increase by 10 percent.
• Sales prices are expected to increase by 5 percent.
• Commissions are based on a percentage of sales revenue.
• Sales staff salaries will increase 4 percent next year regardless of sales volume.
• Building rent is based on a five-year lease that expires in three years.
• Telephone and mailing expenses are scheduled to increase by 8 percent even with no change in sales volume. However, these costs are variable with the number of units sold, as are packaging and delivery costs.
• Utilities costs are scheduled to increase by 15 percent regardless of sales volume.
• Depreciation includes furniture and fixtures used by the sales staff. The company has just acquired an additional $85,500 in furniture that will be received at the start of next year and will be depreciated over a 10-year life using the straight-line method.
• Marketing consultant expenses were for a special advertising campaign that runs from time to time. During the coming year, these costs are expected to average $157,500 per month.
Required
Prepare a budget for sales expenses for a typical month in the coming year.