SPU, Ltd., has just received its sales expense report for January, which follows.

Item Amount

Sales commissions $ 360,500

Sales staff salaries 89,400

Telephone and mailing 41,000

Building lease payment 70,000

Utilities 16,100

Packaging and delivery 73,000

Depreciation 31,750

Marketing consultants 54,190

You have been asked to develop budgeted costs for the coming year. Because this month is typical, you decide to prepare an estimated budget for a typical month in the coming year and you uncover the following additional data:

Sales volume is expected to increase by 14 percent. Sales prices are expected to decrease by 10 percent.

Commissions are based on a percentage of sales revenue.

Sales staff salaries will increase 4 percent next year regardless of sales volume.

Building rent is based on a five-year lease that expires in three years.

Telephone and mailing expenses are scheduled to increase by 10 percent even with no change in sales volume. However, these costs are variable with the number of units sold, as are packaging and delivery costs.

Utilities costs are scheduled to increase by 3 percent regardless of sales volume.

Depreciation includes furniture and fixtures used by the sales staff. The company has just acquired an additional $52,000 in furniture that will be received at the start of next year and will be depreciated over a 10-year life using the straight-line method.

Marketing consultant expenses were for a special advertising campaign that runs from time to time. During the coming year, these costs are expected to average $64,500 per month.