Question

SPU, Ltd., has just received its sales expense report for January, which follows.

Item	Amount
Sales commissions	$	420,500
Sales staff salaries		86,400
Telephone and mailing		46,000
Building lease payment		70,000
Utilities		13,100
Packaging and delivery		74,000
Depreciation		34,750
Marketing consultants		57,190

You have been asked to develop budgeted costs for the coming year. Because this month is typical, you decide to prepare an estimated budget for a typical month in the coming year and you uncover the following additional data:

• Sales volume is expected to increase by 14 percent.
• Sales prices are expected to decrease by 10 percent.
• Commissions are based on a percentage of sales revenue.
• Sales staff salaries will increase 4 percent next year regardless of sales volume.
• Building rent is based on a five-year lease that expires in three years.
• Telephone and mailing expenses are scheduled to increase by 8 percent even with no change in sales volume. However, these costs are variable with the number of units sold, as are packaging and delivery costs.
• Utilities costs are scheduled to increase by 3 percent regardless of sales volume.
• Depreciation includes furniture and fixtures used by the sales staff. The company has just acquired an additional $53,000 in furniture that will be received at the start of next year and will be depreciated over a 10-year life using the straight-line method.
• Marketing consultant expenses were for a special advertising campaign that runs from time to time. During the coming year, these costs are expected to average $64,500 per month.

Required:

Prepare a budget for sales expenses for a typical month in the coming year. (Do not round intermediate calculations.)

Item	Budgeted Typical Month
Sales commissions
Sales staff salaries
Telephone and mailing
Building lease payment
Utilities
Packaging and delivery
Depreciation
Marketing consultants
Total budgeted costs

Answer 1

Budgeted Selling Expenses
Item	Old	Calculations	Budgeted Typical Month	Remarks
Sales Commissions	420500	420500*114%*90%	431433	Increase in Sales Volume and Decrease in Sales Price
Sales Staff Salaries	86400	86400*108%	89856	Increased
Telephone and Mailing	46000	46000*108%	49680	Increased
Buliding Lease Payment	70000	70000	70000	Remain Constant
Utilities	13100	13100*103%	13493	Increased
Packing and Delivery	74000	74000*114%	84360	Increased
Depreciation	34750	34750+5300	40050	Note
Marketing Consultants	57190	64500	64500	Given
Total Budgeted Costs	801940		843372

Calculation of Depreciation

Depreciation=Cost/Life

53000/10=$5300