Activity-Based Budget Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,030 for the Sleepeze, 12,330 for the Plushette, and 4,810 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: a. Salaries for his office (including himself at $64,100, a marketing research assistant at $43,950, and an administrative assistant at $22,900) are budgeted for $130,950 next year. b. Depreciation on the offices and equipment is $22,600 per year. c. Office supplies and other expenses total $22,150 per year. d. Advertising has been steady at $22,000 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 20 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 $45 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 $207 17,780 364 13,800 4,810 Sleepeze $188 12,030 $207 15,030 Plushette 298 10,390 350 12,330 Ultima 860 2,060 970 4,810 1,1801 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 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: Administrative Assistant Research Gene Assistant Research 75% Shipping 30% 20% Jobbers 20 10 20 Basic ads 15 35 Ultima ads 30 5 Office management 20 20 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, $4,800 can be assigned to telephone costs which can be split evenly between the shipping and jobbers tutor on additional 1700 per year is attributable to Internet connections and fees, and the bulk of these costs (85 percent) are assignable to research. The Research Administrative Gene Assistant Assistant Research 75% Shipping 30% 20% Jobbers 20 10 201 Basic ads 15 35 Ultima ads Office management 30 20 5 20 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, $4,800 can be assigned to telephone costs which can be split evenly between the shipping and jobbers activities. An additional $2,800 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. Research: Olympus, Inc. Activity-Based Budget For Next Year Shipping: 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. Research: Olympus, Inc. Activity-Based Budget For Next Year Shipping: Jobbers Basic ads Ultima ads: 000 000 0 0 0 Check My Work 1 more Check My Work uses remaining Previous Next Research: Salaries Telephone Ship Sleepeze Commissions Advertising Olympus, Inc. Activity-Based Budget For Next Year Jobbers: Basic ads: Ultima ads: Office management: Check My Work Research: Activity-Based Budget For Next Year 85 Shipping: Commissions Advertising Depreciation Office Supplies Salaries Jobbers: Basic ads: Ultima ads: 00 00 000 0 000 Office management: Check My Work 1 more Check My Work uses remaining Previous Next Total Jobbers: Depreciation Office Supplies Ship Sleepeze Salaries Ship Ultima Ultima ads: Office management: 0 0 0 0 100000000 2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses. Basic ads: Ultima ads: Office management: Total 0 0 0 2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses. Gene should focus on the most costly activities: salaries, Ultima advertising and commissions to jobbers. Gene should focus on the most costly activities: shipping, basic advertising and commissions to jobbers. Gene should focus on the most costly activities: shipping, Ultima advertising and commissions to jobbers. Previous New