Question: Marketing expense budget. Boston Corporation has just received its mar

ID: 2476360 • Letter: Q

Question

Question:

Marketing expense budget. Boston Corporation has just received its marketing expense report for March of the current year, which follows.

Item Amount

Sales Commissions............................................. $135,000

Sales Staff Salaries........................................................ 32,000

Telephone and Mailing................................................................... 16,200

Building Lease Payment................................ 20,000

Heat, Light, and Water........................................ 4,100

Packaging and Delivery......................................... 27,400

Depreciation........................................................ 12,500

Marketing Consultants...............,................... 19,700

You have been asked to develop budgeted costs for March of next year. Starting with the results for March of this year shown above, you learn the following expectations for next year:

* Sales volume should increase by 5 percent.

* Sales prices should increase 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.

* 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.

* Packaging and delivery costs are not affected by inflation but are variable with the number of units sold.

* Building lease is based on a five-year lease that expires in three years.

* Heat, light, and water are scheduled to increase by 12 percent regardless of sales volume.

* Depreciation includes furniture and fixtures used by the sales staff. There will be no change in depreciation expense.

* Marketing consultant expenses were for a special advertising campaign that runs from time to time During the coming year, the costs are expected to average $35,000 per month

Prepare a budget for marketing expenses for a typical month in the coming year.

Show all calculations properly.

Explanation / Answer

Budgeted Marketing Expenses

Particulars

Actual Expenses($)

Budgeted($)

Amount ($)

Reasons

Sales commission

135000

135000*1.10*1.05

155925

Sales commission depends on sales volume and sales price

Sales staff salaries

32000

32000*1.04

33280

Staff salaries is expected to increase by 4% regardless of sales volume

Telephone and Mailing

16200

16200*1.08*1.05

18371

It increases by 8% and the rest depends on sales volume also

Building Lease Payments

20000

Lease payments are same for the next 3 years

Heat, Light and Water

4100

4100*1.12

4592

It is scheduled to increase by 12% regardless of volume

Packaging and Delivery

27400

27400*1.05

28770

It varies with the number of units sold

Depreciation

12500

Depreciation expense remains unchanged

Marketing Consultants

19700

35000

TOTAL

3,08,438