7.The human resources department of Consumer Cosmetics has responsibility for all aspects of payroll and ongoing management of the HR function, hiring new employees, and terminations. The departmental report for 2015 included the following:

Average number of company employees in 2015 5,000

Number of new hires 500

Number of terminations 50

Number of HR employees 100

HR department costs

Salaries $5,000,000

Employee-related overhead (25% of HR salaries) 1,250,000

Office expenses 5,000,000

Travel & interview costs 1,000,000

Advertising 500,000

Total actual cost $12,750,000

In 2016 it is expected that the number of employees will rise to 5,500; there will be 500 new employees hired and no terminations. Inflation will run at 2% for all costs.

Required

(a) What assumptions do you have to make before you can plan your budget for 2016?

(b) Using those assumptions, prepare a budget for 2016.