Question

9 Case 5-33 Cost Structure; Break-Even and Target Profit Analysis [LO5-4, LO5-5, LO5-6] Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it reles completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all Items sold 10 points Barbara Cheney. Pittmans controller, has Just prepared the companys budgeted Income statement for next year as follows: eBook Pittman Company Budgeted Income Statement For the Year Ended December 31 Print Sales Manufacturing expenses: $ 23,588,888 Variable Fixed overhead $1e,575,0e 3,290,000 13,865,986 9,635,eee References Gross margin Selling and administrative expenses: Commissions to agents Fixed marketing expenses Fixed administrative expenses 3, 525,e8e 164,500 2,188,8ee Net operating income Fixed interest expenses Income before income taxes Income taxes (3e%) Net income 5,789,500 3, 845,500 822,5ee 3,823,9ee 9e6,9e0 S 2,116,1e0 Primarly depreclation on storage faclities. As Barbara handed the statement to Karl Veccl, Pittmans president. She commented, “I went ahead and used the agents, 15% commission rate In completing these statements, but weve just learned that they refuse to handle our products next year unless we increase the commission rate to 20%. Thats the last straw, Karl replled angrily. Those agents have been demanding more and more, and this time theyve gone too far How can they possibly defend a 20% commission rate? They clalm that after paying for advertising, travel, and the other costs of promotion, theres nothing left over for profit, replied Barbara. I say Its Just plaln robbery, retorted Karl. And I also say Its time we dumped those guys and got our own sales force. Can you get your people to work up some cost figures for us to look at? Weve already worked them up. said Barbara. Several companies we know about pay a 7.5% commission to their own salespeople along with a small salary. Of course, we would have to handle all promotion costs, too. We figure our fixed expenses would Increase by $3,525,000 per year, but that would be more than offset by the $4.700,000 (20% x $23.500,000) that we would avoid on agents commissions. The breakdown of the $3,525,000 cost follows Salaries: Sales manager Salespersons $ 146,875 881,258

0 0
Add a comment Improve this question Transcribed image text
Answer #1

la BEP in dollar sales = Fixed expenses/CM ratio 6377000/40% 15,942,500 working 15% Commission 20% Commission Own Sales Force

Add a comment
Know the answer?
Add Answer to:
9 Case 5-33 Cost Structure; Break-Even and Target Profit Analysis [LO5-4, LO5-5, LO5-6] Pittman Company is...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Case 5-33 Cost Structure; Break-Even and Target Profit Analysis (LO5-4, LO5-5, LO5-6) Pittman Company is a...

    Case 5-33 Cost Structure; Break-Even and Target Profit Analysis (LO5-4, LO5-5, LO5-6) 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 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: $26,000,000 15, 340,000 10,660,000 Pittman Company...

  • Check Case 5-33 Cost Structure; Break-Even and Target Profit Analysis (LO5-4, LO5-5, LO5-6] Pittman Company is...

    Check Case 5-33 Cost Structure; Break-Even and Target Profit Analysis (LO5-4, LO5-5, LO5-6] 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 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...

  • CASE 5–33 Cost Structure; Break-Even and Target Profit Analysis LO5–4, LO5–5, LO5–6 Pittman Company is a...

    CASE 5–33 Cost Structure; Break-Even and Target Profit Analysis LO5–4, LO5–5, LO5–6 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 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...

  • Case 5-33 Cost Structure; Break-Even and Target Profit Analysis [LO5-4, LO5-5, LO5-6] Pittman Company is a...

    Case 5-33 Cost Structure; Break-Even and Target Profit Analysis [LO5-4, LO5-5, LO5-6] 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 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...

  • Case 5-33 Cost Structure; Break-Even and Target Profit Analysis [LO5-4, LO5-5, LO5-6] Pittman Company is a...

    Case 5-33 Cost Structure; Break-Even and Target Profit Analysis [LO5-4, LO5-5, LO5-6] 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 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...

  • Check my work Case 5-33 Cost Structure; Break-Even and Target Profit Analysis (L05-4, LOS-5, LO5-6) Pittman...

    Check my work Case 5-33 Cost Structure; Break-Even and Target Profit Analysis (L05-4, LOS-5, LO5-6) 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 to market its products. These agents are paid a sales commission of 15% for al items sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted Income statement for next year as follows: Pittman Company Budgeted...

  • 4, LO5-5, LO5-6] Pittman Company is a small but growing manufacturer of telecommunications equipment. The company...

    4, LO5-5, LO5-6] 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 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...

  • 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: $ 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...

    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...

    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: $22,500,000 pittman Company Budgeted Income Statement For the Year Ended December 31 Sales Manufacturing expenses Variable $10,125,000 Fixed...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT