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 $380,500 92,400 42,000 70,000 12,100 77,000 31,750 51,190 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 10 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 $58,000 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. Round your final answers to nearest whole dollar amount.) 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

The budget for sales expenses for a typical month in comming year is calculated as follows:

	$
Sales Commissions ($380,500 * 1.14 * 1.10)	477,147
Sales Staff Salaries ($92,400 * 1.04)	96,096
Telephone and mailing ($42,000 * 1.10 * 1.14)	52,668
Building lease payment	70,000
Utilities ($12,100 * 1.03)	12,463
Packaging and delivery ($77,000 * 1.14)	87,780
Depreciation ( $31,750 + (($58,000/10)/12)	32,233
Marketing Consultant	64,500
Total budgted Costs	$892,887

The budget for sales expenses for a typical month in comming year is $892,887