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 15,150 for the Sleepeze, 12,190 for the Plushette, and 4,720 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

1. Salaries for his office (including himself at $65,150, a marketing research assistant at $44,250, and an administrative assistant at $26,350) are budgeted for $135,750 next year.
2. Depreciation on the offices and equipment is $17,650 per year.
3. Office supplies and other expenses total $20,250 per year.
4. Advertising has been steady at $21,000 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.
5. Commissions on the Sleepeze and Plushette lines are 5 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores.
6. Last year, shipping for the Sleepeze and Plushette lines averaged $55 per unit sold. Gene expects the Ultima line to ship for $70 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	$188	12,330		$204	15,150		$204	18,070
Plushette	309	9,890		350	12,190		359	14,070
Ultima	900	2,110		1,000	4,720		1,180	4,720

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 319f3a02bfccf9a_1	$fill in the blank 319f3a02bfccf9a_2	$fill in the blank 319f3a02bfccf9a_3
Plushette	fill in the blank 319f3a02bfccf9a_4	fill in the blank 319f3a02bfccf9a_5	fill in the blank 319f3a02bfccf9a_6
Ultima	fill in the blank 319f3a02bfccf9a_7	fill in the blank 319f3a02bfccf9a_8	fill in the blank 319f3a02bfccf9a_9
Total sales	$fill in the blank 319f3a02bfccf9a_10	$fill in the blank 319f3a02bfccf9a_11	$fill in the blank 319f3a02bfccf9a_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 7018e701c06802c_1	$fill in the blank 7018e701c06802c_2	$fill in the blank 7018e701c06802c_3
Depreciation	fill in the blank 7018e701c06802c_4	fill in the blank 7018e701c06802c_5	fill in the blank 7018e701c06802c_6
Office supplies and other	fill in the blank 7018e701c06802c_7	fill in the blank 7018e701c06802c_8	fill in the blank 7018e701c06802c_9
Advertising:
Sleepeze and Plushette	fill in the blank 7018e701c06802c_10	fill in the blank 7018e701c06802c_11	fill in the blank 7018e701c06802c_12
Ultima	fill in the blank 7018e701c06802c_13	fill in the blank 7018e701c06802c_14	fill in the blank 7018e701c06802c_15
Commissions	fill in the blank 7018e701c06802c_16	fill in the blank 7018e701c06802c_17	fill in the blank 7018e701c06802c_18
Shipping:
Sleepeze	fill in the blank 7018e701c06802c_19	fill in the blank 7018e701c06802c_20	fill in the blank 7018e701c06802c_21
Plushette	fill in the blank 7018e701c06802c_22	fill in the blank 7018e701c06802c_23	fill in the blank 7018e701c06802c_24
Ultima	fill in the blank 7018e701c06802c_25	fill in the blank 7018e701c06802c_26	fill in the blank 7018e701c06802c_27
Total	$fill in the blank 7018e701c06802c_28	$fill in the blank 7018e701c06802c_29	$fill in the blank 7018e701c06802c_30