Activity-Based Budget
Olympus, Inc., manufactures three models of mattresses: theSleepeze, the Plushette, and the Ultima. Forecast sales for nextyear are 15,350 for the Sleepeze, 12,280 for the Plushette, and5,400 for the Ultima. Gene Dixon, vice president of sales, hasprovided the following information:
- Salaries for his office (including himself at $65,000, amarketing research assistant at $41,400, and an administrativeassistant at $27,450) are budgeted for $133,850 next year.
- Depreciation on the offices and equipment is $22,750 peryear.
- Office supplies and other expenses total $23,500 per year.
- Advertising has been steady at $22,850 per year. However, theUltima is a new product and will require extensive advertising toeducate consumers on the unique features of this high-end mattress.Gene believes the company should spend 15 percent of first-yearUltima sales for a print and television campaign.
- Commissions on the Sleepeze and Plushette lines are 6 percentof sales. These commissions are paid to independent jobbers whosell the mattresses to retail stores.
- Last year, shipping for the Sleepeze and Plushette linesaveraged $55 per unit sold. Gene expects the Ultima line to shipfor $70 per unit sold since this model features a largermattress.
Suppose that Gene is considering three sales scenarios asfollows:
| Pessimistic | | Expected | | Optimistic |
| Price | Quantity | | Price | Quantity | | Price | Quantity |
| Sleepeze | $183 | 12,330 | | $205 | 15,350 | | $205 | 17,830 |
| Plushette | 294 | 9,980 | | 352 | 12,280 | | 361 | 13,960 |
| Ultima | 900 | 1,860 | | 1,000 | 5,400 | | 1,180 | 5,400 |
Suppose Gene determines that next year's Sales Divisionactivities include the following:
Research—researching current and future conditions in theindustry
