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Determine the volume of sales at which profit would be equal regardless of whether Pittman Company sells through agents (at a 20% commission rate) or
Determine the volume of sales at which profit would be equal regardless of whether Pittman Company sells through agents (at a 20% commission rate) or employs its own sales force.
Pittman Company Budgeted statement of profit or loss for the year ended 31 December 16,000,000 7,200,000 2,340,000 9,540,000 6,460,000 Revenue Manufacturing costs: Variable Fixed overhead Gross margin Selling and administrative costs: Commissions to agents Fixed marketing costs Fixed administrative costs Operating profit Less fixed interest cost Profit before taxes Less taxes (30%) Profit for the period 2,400,000 120,000 1,800,000 4,320,000 2,140,000 (540,000) 1,600,000 (480,000) 1.120.000 The breakdown of the 2,400,000 cost figure follows: Salaries: Sales manager 100,000 Salespersons 600,000 Travel and entertainment Advertising Total 400,000 1.300.000 2,400,000Step by Step Solution
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