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You have been recruited by o former classmate, Susanno Wu$,$ to join the finance team of a company that she founded recently. The

company produces a unique product line of hyposllergenic cosmetics and relies for its success on an aggressive marketing progrom.

The compony is in o start$-$up phose ond therefore hos no significant history of expenses and revenues upon which to rely for

budgeting and planning purposes. Given the restriction on ovailable funds $($most of the available capital hos been used for new$-$

product development and to recruit a management team$),$ the control of costs, including marketing costs, is thought by the

monsgement tesm to be essential for the short$-$term visbility of the company.

You have held a number of intensive discussions with Susanna and John Thompson, director of marketing for the firm. They have

osked you to prepare on estimated budget for marketing expenses for o month of operations.

You ore provided with the following dats, which represent sversge actual monthly costs over the past three months:

Your discussions with John and Susanna indicate the following ossumptions and anticipated changes regarding monthly marketing

expenses for the coming year:

Soles volume, becouse of oggressive marketing, should incresse by $14\%.$

To meet competitive pressures, sales prices are expected to decresse by $7\%.$

Soles commissions are bosed on a percentage of sales revenue.

Soles staff salaries, becouse of a new hire, will incresse by $14\%,$ regordless of sales volume.

Becouse of recent industrywide factors, rates for telephone and mailing costs, os well as delivery charges, are expected to increase

by $10\%.$ However, both of these categories of costs ore varisble with soles volume.

Rent on the office building is bssed on $a2-$year lesse, with $20$ months remsining on the originsl lesse.

Gas utility costs are largely independent of changes in soles volume. However, becouse of industrywide disruptions in supply, these

costs are expected to increose by $11\%,$ regordless of changes in soles volume.

Depreciation on the office furniture used by members of the sales staff should increase becouse of new equipment that will be

acquired. The planned cost for this equipment is $$42,000,$ which will be deprecisted using the straight$-$line $($SL$)$ method, with no

salvage value, over o $5-$year useful life.

Becouse of competitive pressure, the company plans to incresse the cost of marketing consultants by $$7,000$ per month.

Required:

Based on the preceding information, what is the percentsge change, by line item and in total, for items in your budget?

The mansgement team is worried about the short$-$term finsencial position of the new compsny. Given the strain on svailable cosh$,$ the

president hos expressed o desire to keep marketing expenses over the next few months to $0$ moximum of $$360,000.$ Discussions with

the marketing department indicate that telephone and mailing costs are the only category, in the short run, that can ressonably besr

the planned$-$for reduction in marketing costs. The budget you hove prepared includes an sssumed $10\%$ incresse in telephone and

mailing costs. What must this percentage change $($positive or negative$)$ be in order to achieve targeted monthly marketing costs? $($Hint:

The Goal Seek function in Excel can be used to calculate the percentage changes, which can be found under Dato, then What$-$If

Analysis.$)$

Complete this question by entering your answers in the tabs below.

Based on the preceding information, what is the percentage change, by line item and in total, for items in your budget?

$($Round percentage answers to $2$ decimal places. i$.$e$.0\mathrm{.}1234$ should be considered as $12\mathrm{.}34\%.)$

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