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 15,330 for the Sleepeze, 12,180 for the Plushette, and 5,050 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

1. Salaries for his office (including himself at $67,500, a marketing research assistant at $40,950, and an administrative assistant at $26,250) are budgeted for $134,700 next year.
2. Depreciation on the offices and equipment is $22,150 per year.
3. Office supplies and other expenses total $23,250 per year.
4. Advertising has been steady at $20,350 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.
5. Commissions on the Sleepeze and Plushette lines are 3 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 $80 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	$184	12,650		$209	15,330		$209	18,330
Plushette	303	10,220		363	12,180		375	13,770
Ultima	910	1,820		1,000	5,050		1,170	5,050

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	$	$	$

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 15,330 for the Sleepeze, 12, 180 for the Plushette, and 5,050 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: a. Salaries for his office (including himself at $67,500, a marketing research assistant at $40,950, and an administrative assistant at $26,250) are budgeted for $134,700 next year. b. Depreciation on the offices and equipment is $22,150 per year. c. Office supplies and other expenses total $23,250 per year. d. Advertising has been steady at $20,350 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. e. Commissions on the Sleepeze and Plushette lines are 3 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores. f. 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: 1. Suppose that Gene is considering three sales scenarios as follows: Pessimistic Expected Price Quantity Price Quantity Price Quantity Sleepeze $184 12,650 $209 363 15,330 12,180 $209 375 18,330 13,770 Plushette 303 10,220 Ultima 910 1,820 1,000 5,050 1,170 5,050 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 Required: 1. Suppose that Gene is considering three sales scenarios as follows: Pessimistic Expected Optimistic Price Quantity Price Quantity Price Quantity Sleepeze $184 12,650 $209 15,330 $209 18,330 Plushette 303 910 10,220 1,820 363 1,000 12,180 5,050 375 1,170 13,770 5,050 Ultima 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