Sales Forecast and Flexible Budget

Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,160 for the Sleepeze, 12,430 for the Plushette, and 5,410 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

Salaries for his office (including himself at $65,750, a marketing research assistant at $44,400, and an administrative assistant at $23,600) are budgeted for $133,750 next year.

Depreciation on the offices and equipment is $21,150 per year.

Office supplies and other expenses total $19,500 per year.

Advertising has been steady at $17,600 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 15 percent of first-year Ultima sales for a print and television campaign.

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.

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.

Required:

1. Suppose that Gene is considering three sales scenarios as follows:

	Pessimistic			Expected			Optimistic
	Price	Quantity		Price	Quantity		Price	Quantity
Sleepeze	$189	12,040		$214	15,160		$214	18,310
Plushette	292	10,370		333	12,430		346	14,400
Ultima	910	1,820		980	5,410		1,160	5,410

Prepare a revenue budget for the Sales Division for the coming year for each scenario.

Olympus, Inc.
Revenue Budget
For the Coming Year
	Pessimistic	Expected	Optimistic
Sleepeze	$	$	$
Plushette
Ultima
Total sales	$	$	$

2. Prepare a flexible expense budget for the Sales Division for the three scenarios above. If required, round answers to the nearest dollar.

Olympus, Inc.
Flexible Expense Budget
For the Coming Year
	Pessimistic	Expected	Optimistic
Salaries	$	$	$
Depreciation
Office supplies and other
Advertising:
Sleepeze and Plushette
Ultima
Commissions
Shipping:
Sleepeze
Plushette
Ultima
Total	$	$	$