Activity-Based Budget Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,580 for the Sleepeze, 11,980 for the Plushette, and 4,700 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: a. Salaries for his office (including himself at $62,150, a marketing research assistant at $43,800, and an administrative assistant at $22,050) are budgeted for $128,000 next year. b. Depreciation on the offices and equipment is $17,750 per year. c. Office supplies and other expenses total $22,000 per year. d. Advertising has been steady at $19,600 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 10 percent of first-year Ultima sales for a print and television campaign. e. Commissions on the Sleepeze and Plushette lines are 4 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: Sleepeze Plushette Ultima Pessimistic Expected Price Quantity Price Quantity $181 12,720 $200 15,580 304 9,500 362 11,980 850 2,180 970 4,700 Optimistic Price Quantity $200 17,910 377 13,770 1,140 4,700 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 Gene Assistant Assistant Research 70% 25% 15% Shipping Jobbers 15 15 25 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 Assistant Administrative Assistant Gene Research 70% 25% - 15% 15 15 25 Shipping Jobbers Basic ads Ultima ads Office management - 15 30 5 5 30 30 25 Additional information is as follows: a. Depreciation on the office equipment belongs to the office management activity. b. Of the $22,000 for office supplies and other expenses, $5,000 can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional $2,100 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: Salaries 30,660 Internet connections 1,785 32,445 Shipping: Salaries Telephone Ship Sleepeze Ship Plushette Ship Ultima Jobbers: Salaries O 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: Salaries 30,660 Internet connections 1,785 32,445 Shipping: Salaries Telephone Ship Sleepeze Ship Plushette Ship Ultima Jobbers: Salaries Telephone Commissions Basic ads: Salaries curii (II II III Advertising Ultima ads: Salaries Advertising Office management: Salaries Depreciation Office Supplies Total