Activity-Based Budget

Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,550 for the Sleepeze, 12,530 for the Plushette, and 5,350 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:

Salaries for his office (including himself at $64,100, a marketing research assistant at $37,150, and an administrative assistant at $27,000) are budgeted for $128,250 next year.

Depreciation on the offices and equipment is $17,550 per year.

Office supplies and other expenses total $20,150 per year.

Advertising has been steady at $17,000 per year. However, the Ultima is a new product and will require extensive advertising to educate consumers on the unique features of this high-end mattress. Gene believes the company should spend 20 percent of first-year Ultima sales for a print and television campaign.

Commissions on the Sleepeze and Plushette lines are 4 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores.

Last year, shipping for the Sleepeze and Plushette lines averaged $45 per unit sold. Gene expects the Ultima line to ship for $75 per unit sold since this model features a larger mattress.