K D 2 Copy & powing mature of elecommunen. The company has nosas force of Bonber, trebis completely independent des post Babos Cheney's cores ont perparede compeya badgeted content for the next year as follows: 6 Company Badence 2 For the younded December 31 Sales $ 16,000,000 10 Manding pera 11 Variable 3 7.200,000 Fored overhead $ 2340 000 59.540.000 Gross Margin $ 5460.000 14 Selling & Administrative Expenses 15 Commissions to agents $ 2.400.000 Pred marketing expenses $ 120.000 17 Feed administrative expenses $ 1.000.000 $4,320,000 Netoperating income 52,140,000 Fixed interest expenses $ 540 000 Income before income taxes $19000 000 Thooma (10%) 3 480.000 22 Net Income $ 1,120,000 23 24 As Barbara handed the samette Karl Vece man's president who come went ahead and used the agents 15% ission rate in completing these 25 That's the last straw.Kari replied angry Those agents have been demanding more and more, and this time they gone too far. How can they possibly defenda They cam that after paying for advertising, savel, and other costs of promotion there's nothing leftover for profit replied Barbara 27 say it is just plain robbery "retoned Karl And this say it's time we dumped rose guys and run our own salesforce. Can you get your people to work up some cost 2 We've already worked them up sad Barbara "Several companies we know about pay a 7.5% commission to their own salespeople, along with a small salary of The breakdown of 52.400.000 cost follows 31 Sales Manager Salepenons Travel & Entertainment Advertising Total $ 100.000 $ 600,000 $ 400.000 $ 1.300.000 32,400,000 35 H 30 Super, replied Karl And I noticed that the $2,400,000 equals what we're paying the agents under the old 15% commission rate. 39 is even beter than that explained Barbara. "We can actually save $75,000 a year because that's what we are paying our auditors to check out the 40 Put all of these number together and we'll show them to the executive committee tomorrow, said Karl. With the approval of the committee, we can 41 Requirements: 42 Working with your team members, complete the requirements below. Use formulas and cell references and show your calculations. Please BOLD your 43 45 10 Restructure the data into contribution format income statement for each of the three alternatives. Thave done the first alternative for you as an 15% Commission 16,000,000 20% Commission 47 4 49 50 Own Sales Forces 7.200.000 2,400,000 9,600,000 6.400.000 60.00% 40.00% 53 55 SE Sales Variable expenses Manufacturing Commissions (15%, 20%, 75%) Tual variable expenses Contribution Margie Fedexpenses Manufacturing overhead Marketing Administrative Interest Totalfixed expenses Incore before comes Income Netice 2,340,000 120.000 1,800 000 540 000 4,800.000 1.600.000 480.000 1.120,000 00 1 62 64 e 1 88 Computerman's break even point in taler dollars for the next year assuming Show calculation de formules and cell reference points) The agents commission rate remains unchanged at 15% The agents commission rate is increased to 20% The company employs its own sales force b 70 7 22 2 Aume Company decides to continue reting thoughts and pay the 20% cottontale. Determine the Gillar sales that would be required to Sheet1 Ready E G 2 Assume that in Company decides to contine selling through agents and pay the 20% ission rate. Determine the doller sales that would be required to HintUse Income before income taxes for target proft (not net income) ENSEE 78 30 TO 9 Determine the dollar sales which set income would be equal regardless of whether in Company sells through agents (sa 20% commission rate) or employees Hints to determine the volume of sales at which net income would be equal under either the 20% commission plan or the company sales force Use formula below to solve this. Expenses under 20% plan - Expenses if company had own sales force plan Variable expense ratio X+Fixed Expenses Variable Expense ratio X+Fixed Expenses X-Total sales Revenue 60 83 85 87 Prepare contribution formated Income statements to prove that the above equation worked in other words, use the sales revenue calcuated in 08 3b 00 01 2 20% Commission Own Sales Forces 34 35 Sales Variable expenses Manufacturing Commissions (20%, 75%) Total variable expenses Contribution Margie expenses Manufacturing overhead Marketing Administrative UT 100 101 102 104 103 100 Total sed expenses Incombre Income taxes Na Ina Sheet1 + D 0 H 29 30 30 Prepare contribution formated Income statements to prove that the above equation worked. In other words, use the sales revenue calcuated in 20% Commission Own Sales Forces 3 1 Sales Vable expen Manufacturing Commissions (20%, 75%) Toolble pe Corbe Marie Manufacturing overhead Marketing Administrative Interest Toled expenses con before income Income taxes Net 100 101 10 103 164 105 SE OT OR too Net Income for each scenario should be 111 113 144 4 Determine the degree of operating leverage company would expect to have at the end of the next year assuming (9 points). Use The agents commission rate remains unchanged at 15% 6 The agents comission rate is increased to 20% The company employs its own sales force HINT EU tome before Taxes for NOI 15% Commission 20% Commission Own Sales Forces Contribution Margin incone before taxes Degree of Operating Leverage 5 Based on the data in through (4) above, make a recommendation as to where the company should continue to use sales agents (uta 20% 122