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 15,300 for the Sleepeze, 12,520 for the Plushette, and 4,680 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

Salaries for his office (including himself at $63,150, a marketing research assistant at $40,600, and an administrative assistant at $23,900) are budgeted for $127,650 next year.

Depreciation on the offices and equipment is $19,650 per year.

Office supplies and other expenses total $22,400 per year.

Advertising has been steady at $21,450 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.

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 $50 per unit sold. Gene expects the Ultima line to ship for $80 per unit sold since this model features a larger mattress.

Required:

Question Content Area

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

	Pessimistic			Expected			Optimistic
	Price	Quantity		Price	Quantity		Price	Quantity
Sleepeze	$181	12,150		$203	15,300		$203	18,110
Plushette	294	9,760		335	12,520		346	14,580
Ultima	910	2,070		1,020	4,680		1,200	4,680

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	$fill in the blank dc5f0604001afd3_1	$fill in the blank dc5f0604001afd3_2	$fill in the blank dc5f0604001afd3_3
Plushette	fill in the blank dc5f0604001afd3_4	fill in the blank dc5f0604001afd3_5	fill in the blank dc5f0604001afd3_6
Ultima	fill in the blank dc5f0604001afd3_7	fill in the blank dc5f0604001afd3_8	fill in the blank dc5f0604001afd3_9
Total sales	$fill in the blank dc5f0604001afd3_10	$fill in the blank dc5f0604001afd3_11	$fill in the blank dc5f0604001afd3_12

Question Content Area

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	$fill in the blank 0c6adffb4fb703a_1	$fill in the blank 0c6adffb4fb703a_2	$fill in the blank 0c6adffb4fb703a_3
Depreciation	fill in the blank 0c6adffb4fb703a_4	fill in the blank 0c6adffb4fb703a_5	fill in the blank 0c6adffb4fb703a_6
Office supplies and other	fill in the blank 0c6adffb4fb703a_7	fill in the blank 0c6adffb4fb703a_8	fill in the blank 0c6adffb4fb703a_9
Advertising:
Sleepeze and Plushette	fill in the blank 0c6adffb4fb703a_10	fill in the blank 0c6adffb4fb703a_11	fill in the blank 0c6adffb4fb703a_12
Ultima	fill in the blank 0c6adffb4fb703a_13	fill in the blank 0c6adffb4fb703a_14	fill in the blank 0c6adffb4fb703a_15
Commissions	fill in the blank 0c6adffb4fb703a_16	fill in the blank 0c6adffb4fb703a_17	fill in the blank 0c6adffb4fb703a_18
Shipping:
Sleepeze	fill in the blank 0c6adffb4fb703a_19	fill in the blank 0c6adffb4fb703a_20	fill in the blank 0c6adffb4fb703a_21
Plushette	fill in the blank 0c6adffb4fb703a_22	fill in the blank 0c6adffb4fb703a_23	fill in the blank 0c6adffb4fb703a_24
Ultima	fill in the blank 0c6adffb4fb703a_25	fill in the blank 0c6adffb4fb703a_26	fill in the blank 0c6adffb4fb703a_27
Total	$fill in the blank 0c6adffb4fb703a_28	$fill in the blank 0c6adffb4fb703a_29	$fill in the blank 0c6adffb4fb703a_30