Question

SPU, Ltd., has just received its sales expense report for January, which follows. Item Sales commissions Sales staff salaries Telephone and mailing Building lease payment Utilities Packaging and delivery Depreciation Marketing consultants Amount $364,500 86,400 43,000 54,000 11,100 74.000 33,750 53,190 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 6 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 5 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 $53,040 in fumiture 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. 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

Item	Budgeted Typical Month
Sales commissions [364500*114%*110%]	$ 4,57,083
Sales staff salaries [86400*106%]	$                  91,584
Telephone and mailing [43000*105%*114%]	$                  51,471
Building lease payment	$                  54,000
Utilities [11100*103%]	$                  11,433
Packaging and delivery [74000*105%*114%]	$                  88,578
Depreciation [33750+53040*10%]	$                  39,054
Marketing consultants	$                  64,500
Total budgeted costs	$ 8,57,703