Reference no: EM132460258

The data represents average actual monthly costs over the past three months:

Cost                                                      Amount

Sales commissions                           $120,000

Sales staff salaries                             40,000

Telephone and mailing                          38,000

Rental-office building                            25,000

Gas (utilities)                                       12,000

Delivery charges                                   70,000

Depreciation-office furniture                    8,000

Marketing consultants                             25,000

The assumptions

1. Sales volume, because of aggressive marketing, should increase by 10%
2. To meet competitive pressures, sales prices are expected to decrease by 5%.
3. Sales commissions are based on a percentage of sales revenue.
4. Sales staff salaries, because of a new hire, will increase by 10%, regardless of sales volume.
5. Because of recent industrywide factors, rates for telephone and mailing costs, as well as delivery charges, are expected to increase by 6%. However, both of these categories of costs are variable with sales volume.
6. Rent on the office building is based on a two-year lease, with 18 months remaining on the original lease.
7. Gas utility costs are largely independent of changes in sales volume. However, because of industrywide disruptions in supply, these costs are expected to increase by 15%, regardless of changes in sales volume.
8. Depreciation on the office furniture used by members of the sales staff should increase because of new equipment that will be acquired. The planned cost for this equipment is $30,000, which will be depreciated using the straight-line (SL) method, with no salvage value, over a five-year useful life.
9. Because of competitive pressure, the company plans to increase the cost of marketing consultants by $5,000 per month.

Question 1. How would you calculate the percentage change for items in your budget?

I
Monthly Marketing Expense Budget		Change
Sales Commissions	t                   oolk
Sales Staffs Salaries
Telepone and mailing			')/0
Rental-Sales office building			'Yo
Gas (utilities)			%
Delivery charges			%
Depreciation-Office furniture:
Existing furniture	¦         o		%
New furniture	*		%
Marketing consultants	o                   o		ok
Total Budgeted Costs	.                    .		%