Matthew Gabon, the sales manager of Office Furniture Solutions, prepared the following budget for 2020:
Sales Department
Budgeted Costs, 2020
(Assuming Sales of $11,000,000)
Salaries (fixed)…………………………………………$400,000
Commissions (variable)………………………………150,000
Advertising (fixed)………………………………………..75,000
Charge for office space (fixed)…………………………3,000
Office supplies & forms (variable)……………………2,000
Total………………………………………………………….$630,200
After he submitted his budget, the president of Office Furniture Solutions reviewed it and recommended that advertising be increased to $100,000. Further, she wanted Matthew to assume a sales level of $11,000,000. This level of sales is to be achieved without adding to the salesforce
Matthew’s sales group occupies approximately 250 square feet of office space out of total administrative office space of 20,000 square feet. The $3,000 space 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.
Required:
a. Evaluate the department in terms of its increases in sales and expenses. Do you believe it would be useful to investigate either or both of the increases in expenses?
b. Consider storewide electricity cost. Would this cost be a controllable or a noncontrollable cost for the manager of sporting goods? Would it be useful to include a share of storewide electricity cost on the performance report for sporting goods?
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