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 14,880 for the Sleepeze, 11,860 for the Plushette, and 5,210 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

Salaries for his office (including himself at $66,750, a marketing research assistant at $38,850, and an administrative assistant at $27,700) are budgeted for $133,300 next year. Depreciation on the offices and equipment is $18,450 per year. Office supplies and other expenses total $22,700 per year. Advertising has been steady at $19,850 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. 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. 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 $188 12,650 $209 14,880 $209 17,800 Plushette 297 9,860 346 11,860 357 14,270 Ultima 860 2,150 970 5,210 1,180 5,210

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 $ $ $