Question Content Area Activity-Based Budget Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,520 for the Sleepeze, 12,360 for the Plushette, and 5,380 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: Salaries for his office (including himself at $62,500, a marketing research assistant at $43,150, and an administrative assistant at $24,950) are budgeted for $130,600 next year. Depreciation on the offices and equipment is $19,250 per year. Office supplies and other expenses total $18,450 per year. Advertising has been steady at $22,850 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 4 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 $55 per unit sold. Gene expects the Ultima line to ship for $80 per unit sold since this model features a larger mattress. Suppose that Gene is considering three sales scenarios as follows: Pessimistic Expected Optimistic Price Quantity Price Quantity Price Quantity Sleepeze $183 12,030 $207 15,520 $207 18,210 Plushette 302 9,700 352 12,360 364 14,520 Ultima 910 1,990 1,010 5,380 1,230 5,380 Suppose Gene determines that next year's Sales Division activities include the following: Research—researching current and future conditions in the industry Shipping—arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors Jobbers—coordinating the efforts of the independent jobbers who sell the mattresses Basic ads—placing print and television ads for the Sleepeze and Plushette lines Ultima ads—choosing and working with the advertising agency on the Ultima account Office management—operating the Sales Division office The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table: Gene Research Assistant Administrative Assistant Research - 75 % - Shipping 25 % - 20 % Jobbers 10 15 20 Basic ads - 10 35 Ultima ads 25 - 10 Office management 40 - 15 Additional information is as follows: Depreciation on the office equipment belongs to the office management activity. Of the $18,450 for office supplies and other expenses, $5,000 can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional $2,600 per year is attributable to Internet connections and fees, and the bulk of these costs (85 percent) are assignable to research. The remainder is a cost of office management. All other office supplies and costs are assigned to the office management activity. Required: Question Content Area 1. Prepare an activity-based budget for next year by activity. Use the expected level of sales activity. If required, round answers to the nearest dollar. Olympus, Inc.Activity-Based BudgetFor Next Year Research: $- Select - - Select - $- Select - Shipping: $- Select - - Select - - Select - - Select - - Select - - Select - Jobbers: $- Select - - Select - - Select - - Select - Basic ads: $- Select - - Select - - Select - Ultima ads: $- Select - - Select - - Select - Office management: $- Select - - Select - - Select - - Select - Total $fill in the blank b43afbf80ffc04d_41 Question Content Area 2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses.

Question Content Area Activity-Based Budget Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,520 for the Sleepeze, 12,360 for the Plushette, and 5,380 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: Salaries for his office (including himself at $62,500, a marketing research assistant at $43,150, and an administrative assistant at $24,950) are budgeted for $130,600 next year. Depreciation on the offices and equipment is $19,250 per year. Office supplies and other expenses total $18,450 per year. Advertising has been steady at $22,850 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 4 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 $55 per unit sold. Gene expects the Ultima line to ship for $80 per unit sold since this model features a larger mattress. Suppose that Gene is considering three sales scenarios as follows: Pessimistic Expected Optimistic Price Quantity Price Quantity Price Quantity Sleepeze $183 12,030 $207 15,520 $207 18,210 Plushette 302 9,700 352 12,360 364 14,520 Ultima 910 1,990 1,010 5,380 1,230 5,380 Suppose Gene determines that next year's Sales Division activities include the following: Research—researching current and future conditions in the industry Shipping—arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors Jobbers—coordinating the efforts of the independent jobbers who sell the mattresses Basic ads—placing print and television ads for the Sleepeze and Plushette lines Ultima ads—choosing and working with the advertising agency on the Ultima account Office management—operating the Sales Division office The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table: Gene Research Assistant Administrative Assistant Research - 75 % - Shipping 25 % - 20 % Jobbers 10 15 20 Basic ads - 10 35 Ultima ads 25 - 10 Office management 40 - 15 Additional information is as follows: Depreciation on the office equipment belongs to the office management activity. Of the $18,450 for office supplies and other expenses, $5,000 can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional $2,600 per year is attributable to Internet connections and fees, and the bulk of these costs (85 percent) are assignable to research. The remainder is a cost of office management. All other office supplies and costs are assigned to the office management activity. Required: Question Content Area 1. Prepare an activity-based budget for next year by activity. Use the expected level of sales activity. If required, round answers to the nearest dollar. Olympus, Inc.Activity-Based BudgetFor Next Year Research: $- Select - - Select - $- Select - Shipping: $- Select - - Select - - Select - - Select - - Select - - Select - Jobbers: $- Select - - Select - - Select - - Select - Basic ads: $- Select - - Select - - Select - Ultima ads: $- Select - - Select - - Select - Office management: $- Select - - Select - - Select - - Select - Total $fill in the blank b43afbf80ffc04d_41 Question Content Area 2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses.

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Question Content Area

Activity-Based Budget

Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,520 for the Sleepeze, 12,360 for the Plushette, and 5,380 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

Salaries for his office (including himself at $62,500, a marketing research assistant at $43,150, and an administrative assistant at $24,950) are budgeted for $130,600 next year.
Depreciation on the offices and equipment is $19,250 per year.
Office supplies and other expenses total $18,450 per year.
Advertising has been steady at $22,850 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 4 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 $55 per unit sold. Gene expects the Ultima line to ship for $80 per unit sold since this model features a larger mattress.

Suppose that Gene is considering three sales scenarios as follows:

	Pessimistic		Expected		Optimistic
	Price	Quantity		Price	Quantity	Price	Quantity
Sleepeze	$183	12,030		$207	15,520	$207	18,210
Plushette	302	9,700		352	12,360	364	14,520
Ultima	910	1,990		1,010	5,380	1,230	5,380

Suppose Gene determines that next year's Sales Division activities include the following:

Research—researching current and future conditions in the industry

Shipping—arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors

Jobbers—coordinating the efforts of the independent jobbers who sell the mattresses

Basic ads—placing print and television ads for the Sleepeze and Plushette lines

Ultima ads—choosing and working with the advertising agency on the Ultima account

Office management—operating the Sales Division office

The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table:

	Gene	Research Assistant	Administrative Assistant
Research	-		75	%	-
Shipping	25	%	-		20	%
Jobbers	10		15		20
Basic ads	-		10		35
Ultima ads	25		-		10
Office management	40		-		15

Additional information is as follows:

Depreciation on the office equipment belongs to the office management activity.
Of the $18,450 for office supplies and other expenses, $5,000 can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional $2,600 per year is attributable to Internet connections and fees, and the bulk of these costs (85 percent) are assignable to research. The remainder is a cost of office management. All other office supplies and costs are assigned to the office management activity.

Required:

Question Content Area

1. Prepare an activity-based budget for next year by activity. Use the expected level of sales activity. If required, round answers to the nearest dollar.

Olympus, Inc.Activity-Based BudgetFor Next Year

Research:
	$- Select -
	- Select -	$- Select -
Shipping:
	$- Select -
	- Select -
	- Select -
	- Select -
	- Select -	- Select -
Jobbers:
	$- Select -
	- Select -
	- Select -	- Select -
Basic ads:
	$- Select -
	- Select -	- Select -
Ultima ads:
	$- Select -
	- Select -	- Select -
Office management:
	$- Select -
	- Select -
	- Select -	- Select -
Total			$fill in the blank b43afbf80ffc04d_41

Question Content Area

2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses.

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