Fundamentals of Cost Accounting 2nd Edition by William Lanen, Carolyn Wells, Michael Maher

Exercise 25

Sales Expense Budget
Capstone Corporation has just received its sales expense report for January, which follows.

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 10 percent.
•Sales prices are expected to increase by 5 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 8 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 15 percent regardless of sales volume.
•Depreciation includes furniture and fixtures used by the sales staff. The company has just acquired an additional $57,000 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 $105,000 per month.
Required
Prepare a budget for sales expenses for a typical month in the coming year.