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, . f. Last year, shipping for the Sleepeze and Plushette lines averaged $45 per unit sold. Gene expects the Ultima line to ship for 575 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 Price Quantity Sleepeze $176 12,130 $201 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 Gene Assistant Assistant Research 70% Shipping 30% 15% - Jobbers 20 10 25 Basic ads 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 522,400 for office supplies and other expenses, 54,500 can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional 52,400 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: Salaries 24,990 Internet connections 2,1140 27.030 Shipping Salaries 22,845 X Telephone 2,250 Salaries 24,990 2,040 27,030 Internet connections Shipping: Salaries 22,845 X Telephone 2,250 Ship Sleepeze 685,HOD Ship Plushette 527.850 Ship Ultima 392,250) 1,630,995 x Jobbers: Salaries 22,130 X Telephone 2,500X Commissions 419,567.4 X 444,197 X Basic ads: Salaries Advertising 14,910 !! 36,210 Ultima ads: : Salaries 20,625 x 1,025,080 Advertising Office management: Salaries Depreciation 17,450 X Total