a. | Break-even point in dollar sales | 16,497,500 | |||||
BEP(dollar sales) = | fixed expense/contribution margin ratio | ||||||
Fixed cost | 6,599,000 | ||||||
Contribution margin | 40.0% | ||||||
b) | Break even point in dollar sales | 18,854,286 | |||||
c) | Break even point in dollar sales | 21,392,211 | |||||
2) | Voulme of sales (in dollars) | 28,000,000 | |||||
(Target income before taxes +fixed expense)/contribution margin | |||||||
3) | Voulme of Sales (in dollars) | 28,498,400 | |||||
X = | total evenue | ||||||
.65 X + 6,599,000= | .525x +10,161,300 | ||||||
0.125 | x | = | 3,562,300 | ||||
x = | 28498400 | ||||||
4) | |||||||
a) | Degree of operating leverage | 3.06 | |||||
b) | Degree of operating leverage | 4.34 | |||||
c) | Degree of operating leverage | 7.88 | |||||
degree of operating leverage = contribution marging/income before taxes | |||||||
Working notes:
15% comm | 20% comm | 7.5% comm | ||||||
Sales | 24,500,000 | 100% | 24,500,000 | 100% | 24,500,000 | 100% | ||
Variable expenses: | ||||||||
manufacturing | 11,025,000 | 11,025,000 | 11,025,000 | |||||
comissions (15%;20%,7.5%) | 3,675,000 | 4900000 | 1837500 | |||||
total variable expense | 14,700,000 | 60.0% | 15,925,000 | 65.0% | 12,862,500 | 52.5% | ||
contribution margin | 9,800,000 | 40.0% | 8,575,000 | 35.0% | 11,637,500 | 47.5% | ||
fixed expenses | ||||||||
manufacturing overhead | 3,430,000 | 3,430,000 | 3,430,000 | |||||
marketing | 171,500 | 171,500 | 3,846,500 | |||||
administrative | 2,140,000 | 2,140,000 | 2,027,300 | |||||
interest | 857,500 | 857,500 | 857,500 | |||||
total fixed expense | 6,599,000 | 6,599,000 | 10,161,300 | |||||
income before income taxes | 3,201,000 | 1,976,000 | 1,476,200 | |||||
income taxes (30%) | 960300 | 592800 | 442860 | |||||
net income | 2,240,700 | 1,383,200 | 1,033,340 | |||||
increase in fixed expense-marketing | 3,675,000 | |||||||
saving in administrative expense | -112700 |
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows: 1:06:50 $ 20,000,000 Fook 11,800,000 8,200,000 rint Pittman Company Budgeted Income Statement For the Year Ended December 31...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows: $ 17,000,000 10,030,000 6,970,000 Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales Manufacturing expenses:...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows: $ 20,000,000 11,800,000 8,200,000 Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales Manufacturing expenses:...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows: $ 23,500,000 13,865,000 9,635,000 Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales Manufacturing expenses:...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 23,000,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows: $21,000,000 12,390,000 8,610,000 Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales Manufacturing expenses: Variable...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Building Your Skills Case (LO6-4, LO6-5, LO6-6) Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 23,000,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 17,500,000 Manufacturing expenses: Variable $...
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 22,500,000 Manufacturing expenses: Variable $...