Activity-Based Budget Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,240 for the Sleepeze, 11,730 for the Plushette, and 5,230 for the Ultima. , , , Gene Dixon, vice president of sales, has provided the following information: , : a. Salaries for his office (including himself at $64,050, a marketing research assistant at $35,700, and an administrative assistant at $22,200) are budgeted for $121,950 next year. b. Depreciation on the offices and equipment is $19,500 per year. c. Office supplies and other expenses total $22,400 per year. d. Advertising has been steady at $21,300 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 6 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 Sleepeze $176 12,130 5201 15, 240 $201 17,580 Plushette 295 10,070 335 11,730 347 13,870 Ultima 890 1,830 980 5,230 1,210 5,230 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 Assistant Gene Assistant 70% 30% . 15% Research Shipping Jobbers Basic ads 20 10 25 - 20 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 $22,400 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 $2,400 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:) D Jobbers: Basic ads: mom000 10000 Ultima ads: | | | | (| Office management: Total 2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses