Check my Pittman Company anal but growing manufacturer of telecommunicationsequement. The company has no salesforce of its own rather relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for at tems sold Barbara Cherwy. Pimman controller, has just pressered the company's budgeted come statement for rent year at follows 515.000,00 Manufacturing Variable 57,200.00 Hled over 30. Boss Selling and strative Comissions to 2.400. Fixed martin 10.00 entrative torting 2.14, Fixed interest Encone before in ta 1.000.000 Incot tants 30 . e Inc 11.130.000 "Primarily depreciation on storage facilities As Barbate handed the statement to Karl Veco Pittman's president, she commented, went ahead and used the agents commissionate in completing these statements, but we've learned that they refuse to handle our products next year unless we increase the commission rate to 20 "That's the last straw." Karl replied angrily 'Those agents have been demanding more and more and time they've gone too far How can they possibly defend a 20%.com te "They cam that after paying for advertising travel and the other costs of promotion, there's nothing left over for profit" replied Pey Nox * say it's just plom robbery retorted Kort "Andia to say it's time we dumped those guys and got our own salesforce. Can you get your people to work up some cost figures for us to look at "We ve already worked them up," said Barbara "Several companies we know about pay a 75% commission to their own salespeople, along with a small salary Of course, we would have to handle all promotion costs, too We figure our foed expenses would increase by 52.400.000 per year but that would be more than offset by the $3.200,000 120% $16.000.000) that we would avoid on agents commissions The breakdown of the $2,400,000 cost follows Salari Salesman Salespersone Travel and entertainment Advertising Total 100.000 500,000 400,00 1.300 1.2.400,000 "Super" replied art. "And I noticed that the $2.400.000 equals what we're paying the agents under the old 15% commission rate. "It's even better than that explained Barbara "We can actually save $75,000 a year because that's what were paying our auditors to check out the agents' reports. So our overall administrative expenses would be less Pull all of these numbers together and we show them to the executive committee tomonow" said Karl With the approval of the committee, we can move on the matter immediately Required: 1 Computer Pittman Company's break-even point in dollar sales for next year assuming The agents commission rate remains unchanged at 15% D. The agents commission rate is increased to 20% c. The company employs its own salesforce 2. Assume that itinan Company decides to continue selling through agents and pays the 20% commission rate Determine the door Then Advertising Total 1.100.000 $ 2,400.00 oped Super" replied Kart. "And I noticed that the $2,400,000 equals what we're paying the agents under the old 15% commission rate "It's even better than that," explained Barbara "We can actually save $75.000 a year because that's what we're paying our auditors to check out the agents reports. So our overall administrative expenses would be less "Pull all of these numbers together and we'll show them to the executive committee tomorrow." said Karl. With the approval of the committee, we can move on the matter immediately." Required: 1. Compute Pittman Company's break-even point in dollar sales for next year assuming a. The agents commission rate remains unchanged at 15% b. The agents commission rate is increased to 20% c. The company employs its own sales force 2. Assume that Pittman Company decides to continue selling through agents and pays the 20 consorate Determine the color sales that would be required to generate the same net income as contained in the budgeted income statement for next year 3. Determine the dollar sales at which net income would be equal regardless of whether Pittman Company sells through agents tota 20% commission rate) or employs its own sales force 4. Compute the degree of operating leverage that the company would expect to have at the end of next year assuming a The agents commission rate remains unchanged at 15% b. The agents commission rate is increased to 20% c. The company employs its own sales force Use income before income taxes in your operating leverage computation Prov 1 of 1 !!! Next