Question

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

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

Homework Answers

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

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