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Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,310 for the Sleepeze, 12,700 for the Plushette, and 5,200 for the Ultima. Gene Dixon, vice president of sales, has provided the following information: a. Salaries for his office (including himself at $63,450, a marketing research assistant at $43,800, and an administrative assistant at $26,500) are budgeted for $133,750 next year. b. Depreciation on the offices and equipment is $17,600 per year. c. Office supplies and other expenses total $19,200 per year. d. Advertising has been steady at $20,900 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 15 percent of first-year Ultima sales for a print and television campaign. e. Commissions on the Sleepeze and Plushette lines are 6 percent of sales. These commissions are paid to independent jobbers who sell the mattresses to retail stores. f. Last year, shipping for the Sleepeze and Plushette lines averaged $55 per unit sold. Gene expects the ultima line to ship for $70 per unit sold since this model features a larger mattress. Suppose that Gene is considering three sales scenarios as follows: Sleepeze Plushette Ultima Pessimistic Expected Optimistic Price Quantity Price Quantity Price Quantity $172 12,010 $197 15,310 $197 17,790 304 9,530 358 12,700 372 14,140 870 2,120 950 5,200 1,140 5,200 Suppose Gene determines that next year's Sales Division activities include the following: Research-researching current and future conditions in the industry Shipping-arranging for shipping of mattresses and handling calls from purchasing agents at retail stores to trace shipments and correct errors Jobbers-coordinating the efforts of the independent jobbers who sell the mattresses Basic ads-placing print and television ads for the Sleepeze and Plushette lines Ultima ads-choosing and working with the advertising agency on the Ultima account Office management-operating the Sales Division office The percentage of time spent by each employee of the Sales Division on each of the above activities is given in the following table: Research Administrative Gene Assistant Assistant Research 70% 30% 25% 15 15 15 Shipping Jobbers Basic ads Ultima ads Office management 15 30 25 5 30 25 Additional information is as follows: a. Depreciation on the office equipment belongs to the office management activity. b. Of the $19,200 for office supplies and other expenses, $4,500 can be assigned to telephone costs which can be split evenly between the shipping and jobbers' activities. An additional $2,400 per year is attributable to Internet connections and fees, and the bulk of these costs (75 percent) are assignable to research. The remainder is a cost of office management. All other office supplies and costs are assigned to the office management activity. 1. Prepare an activity-based budget for next year by activity. Use the expected level of sales activity. If required, round answers to the nearest dollar. Olympus, Inc. Activity-Based Budget For Next Year Research: Shipping: Jobbers: 00 011 000 00 00 001 Basic ads: Ultima ads: Office management: Total o 0 Salaries Telephone Ship Sleepeze Commissions Advertising Internet connections Telephone Ship Sleepeze Commissions Advertising Commissions Advertising Depreciation Office Supplies Salaries Commissions Advertising Depreciation Office Supplies Telephone Commissions Advertising Depreciation Office Supplies Ship Sleepeze Commissions Advertising Depreciation Office Supplies Ship Plushette Commissions Advertising Depreciation Office Supplies Ship Ultima Depreciation Office Supplies Ship Sleepeze Salaries Ship Ultima Depreciation Office Supplies Ship Sleepeze Telephone Ship Ultima Depreciation Office Supplies Ship Sleepeze Commissions Ship Ultima Depreciation Office Supplies Ship Sleepeze Ship Ultima Salaries Depreciation Office Supplies Ship Sleepeze Ship Ultima Advertising Depreciation Office Supplies Ship Sleepeze Ship Ultima Salaries Depreciation Office Supplies Ship Sleepeze Ship Ultima Advertising Salaries Internet connections Advertising Ship Ultima Depreciation Salaries Internet connections Advertising Ship Ultima Ship Sleepeze Salaries Internet connections Office Supplies Ship Ultima 2. On the basis of the budget prepared in Requirement 1, advise Gene regarding actions that might be taken to reduce expenses. Gene should focus on the most costly activities: salaries, Ultima advertising and commissions to jobbers. Gene should focus on the most costly activities: shipping, basic advertising and commissions to jobbers. Gene should focus on the most costly activities: shipping, Ultima advertising and commissions to jobbers