Question

Matthew Gabon, the sales manager of Office Furniture Solutions, prepared the following budget for 2017:

Sales Department Budgeted Costs, 2017 (Assuming Sales of $19,200,000)
Salaries (fixed)		$400,000
Commissions (variable)		170,000
Advertising (fixed)		88,000
Charge for office space (fixed)		3,900
Office supplies & forms (variable)		2,200
Total		$664,100

After he submitted his budget, the president of Office Furniture Solutions reviewed it and recommended that advertising be increased to $103,000. Further, she wanted Matthew to assume a sales level of $23,040,000. This level of sales is to be achieved without adding to the sales force.

Matthew’s sales group occupies approximately 250 square feet of office space out of total administrative office space of 20,000 square feet. The $3,900 space charge in Matthew’s budget is his share (allocated based on relative square feet) of the company’s total cost of rent, utilities, and janitorial costs for the administrative office building.

Prepare a revised budget consistent with the president’s recommendation.

Answer 1

Ans= Revise budget

Sales estimated to be $23040000

Particular Amt in

1) salary Fixed 400000

2)commission (varible)

=170000*23040000/19200000 204000

3)Advertisement fixed 103000

4) Office supplies (variable)

=2200*23040000/19200000 2640

5) charges for office

=3900*20000/250 312000

Total 1021640

Note- sales increase without increase any sales force hence salaries are fixed

Commission & office supplies are variable hence change in proportion of change in sales =23040000/19200000

Advertisement is also fixed hence increase in a single amount of 103000

Important I assume that this is the complete budget of all the sales product of company hence in this budget overall administration cost should charge & not only that area cost which is related to sales unit

Hence total area cost

=3900*20000/250=312000

Finish