Matthew Gabon, the sales manager of Office Furniture Solutions, prepared the fol

Question

Matthew Gabon, the sales manager of Office Furniture Solutions, prepared the following budget for 2008:

Sales Department
Budgets Costs, 2008
(Assuming Sales of $12M)

Salaries (fixed) $500,000
Commissions (variable) $180,000
Advertising (fixed) $100,000
Charge for office space (fixed) $2,000
Office supplies & forms (variable) $2,400
TOTAL $784,400

After he submitted his budget, the president of Office Furniture Solutions reviewed it and recommended that advertising be increased to $120,000. Further, she wanted Matthew to assume a sales level of $13,000,000. This level of sales is to be achieved without adding to the sales force.

Matthew’s sales group occupies approximately 250 square feet of office space out of total administrative office space of 20,000 square feet The $2,000 square charge in Matthew’s budget is his share (allocated based on relative square feet) of the company’s total cost of rent, utilities, and janitorial costs for the administrative office building

Prepare a revised budget consistent with the president’s recommendation.

This is how far I got but not sure I'm on the right track. Not sure how to assess the office space information although I know it's vital to the calculations-

Sales Department
Budgets Costs, 2008
(Assuming Sales of $12M) Increased sales to $13M

Salaries (fixed) $500,000 $500,000
Commissions (variable) $180,000 $180,000
Advertising (fixed) $100,000 $120,000
Charge for office space (fixed) $2,000 $2,000
Office supplies & forms (variable) $2,400 $2,400
TOTAL $784,400 $804,400

Explanation / Answer

Planning Budget for 2008 Revenues $13,000,000 Expenses: Salaries (Fixed) 500,000 Commission(Variable) 195,000 Advertising 120,000 Charge for office space(250sq.f) 25 Office supplies&forms(Variable) 2,600 Total expenses 817,625 Net operating income 12,182,375 Workig notes: Commission (Variable) For 12,000,000 Sales ---      $180,000 For 13,000,000 sales ---           ? Commission = 13,000,000 * 180,000/12,000,000                    =$195,000 Office Space: $2,000 Total office space is given 20,000Sft For 20,000sft ---$2,000 For 1sft   ----     ? Office space charges = 2,000/20,000=0.10               For 250Sft    ---       ? Office space charges =250 * 0.10                                  =25                                   Planning Budget for 2008 Revenues $13,000,000 Expenses: Salaries (Fixed) 500,000 Commission(Variable) 195,000 Advertising 120,000 Charge for office space(250sq.f) 25 Office supplies&forms(Variable) 2,600 Total expenses 817,625 Net operating income 12,182,375

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