Sales Forecast and Flexible Budget
Olympus, Inc., manufactures three models of mattresses: theSleepeze, the Plushette, and the Ultima. Forecast sales for nextyear are 15,130 for the Sleepeze, 11,920 for the Plushette, and5,500 for the Ultima. Gene Dixon, vice president of sales, hasprovided the following information:
- Salaries for his office (including himself at $64,200, amarketing research assistant at $39,950, and an administrativeassistant at $23,900) are budgeted for $128,050 next year.
- Depreciation on the offices and equipment is $18,150 peryear.
- Office supplies and other expenses total $22,500 per year.
- Advertising has been steady at $21,650 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 10 percent of first-yearUltima sales for a print and television campaign.
- Commissions on the Sleepeze and Plushette lines are 3 percentof sales. These commissions are paid to independent jobbers whosell the mattresses to retail stores.
- Last year, shipping for the Sleepeze and Plushette linesaveraged $45 per unit sold. Gene expects the Ultima line to shipfor $80 per unit sold since this model features a largermattress.
Required:
1. Suppose that Gene is considering three salesscenarios as follows:
| Pessimistic | | Expected | | Optimistic |
| Price | Quantity | | Price | Quantity | | Price | Quantity |
| Sleepeze | $179 | 12,660 | | $204 | 15,130 | | $204 | 17,770 |
| Plushette | 302 | 10,300 | | 352 | 11,920 | | 362 | 14,520 |
| Ultima | 860 | 2,140 | | 950 | 5,500 | | 1,130 | 5,500 |
Prepare a revenue budget for the Sales Division for the comingyear 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 theSales Division for the three scenarios above. If required, roundanswers 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 | $ | $ | $ |
