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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

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 14,830 for the Sleepeze, 11,810 for the Plushette, and 5,020 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

  1. Salaries for his office (including himself at $67,050, a marketing research assistant at $36,900, and an administrative assistant at $22,900) are budgeted for $126,850 next year.
  2. Depreciation on the offices and equipment is $21,600 per year.
  3. Office supplies and other expenses total $20,650 per year.
  4. Advertising has been steady at $19,200 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 4 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 $50 per unit sold. Gene expects the Ultima line to ship for $70 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 $172 12,540 $190 14,830 $190 17,880
Plushette 294 10,500 337 11,810 348 14,110
Ultima 920 2,120 1,010 5,020 1,230 5,020

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 $ $ $

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