Question

Styles Text Box 3. The annual planning process at Century Office Systema, Inc. had been arduous but produced a sumber of important marketing initiatives for the next year. Most notably, coepany executives had decided to restructure its product-marketing team inte twe separate groups: (1) Corporate Office Systems and (2) Home Office Systems. Angela Blake (Marketing Director) was assigned responsibility for the Home Office Systems group, which would market the company's word- processing hardware and software for home and office-at-home use by individuals. Her marketing plan, which incladed a sales forecast for mext year of $30 million, was the result of a detailed market analysis and segotiations with individuals both inside and outside the company. Her discussions with the sales director indicated that 40 percent of the company sales force would be dedicated to selling products of the Home Office Systems group. Sales representatives woald also receive a 15 percent commission on sales ofhome office systerms Under the new organizational strecture, the Home Office Systems group would be charged with 40 percent of the total budgeted sales force expenditures. Those expenditures included the sales director's budget for salaries and fringe benefits of the sales force and non-commission selling cests for both the Corporate& Home Office Systems groups at $8.0 million. The advertising and promotion badget contained three elements: trade magazine advertising, cooperative newspaper advertising with Century Office Systems Ine. dealers, and sales promotion materials including product brochures, technical masuals, catalogs, and point- of parchase displays. Trade magazine ads and sales prometion materials were to be developed by the com pany's advertising and public relations agency. Production and media placement costs for that trade& sales prometion were budgeted at $350,000. Cooperative advertising copy for both newspaper and radio use had budgeted production costs of $100,000. Century Office Systems, lec.'s ceoperative advertising allowance policy stated that the company would allocate 5 percent of company sales to dealers to promote its office systems Dealers always used their complete cooperative advertising allowances. Meetings with manufacturing and operations personnel indicated that the direct costs of material a %-or ma direet factory overhead to produce the l lome omce System product line represetted 50 percent of sales. The accounting department wowld assign $700,000 in indirect manufacturing overhead (for example, depreciatiom, maintenance) to the product line and $300,000 for administrative overhead (elerical, telephone, office space, and so forth). Freight for the product line would cost 8 percent of sales. Blake's staff comsisted oftwo product managers and a marketing assistant. Salaries and fringe benefits for Ms. Blake and her staff were $350,000 per year Prepare a pro forma income statement for the Home Office Systems group given the information provided above. Below is a general outline of the categories and format for the pro forma statement. Include all the relevant line items for each category of information. A sew of the figures are provided to give you some help. Pro forma Income Statement for Home Office Systems (12 menth peried ending XxxX) Sales $30,000.000 Less COGS and other variable cests Gross profit margin $6,600,00o Less Fixed Costs Net profit before taxes Print Layout View Sec 1 Pages:4 of 4 Words: 1329 of 90%

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