Lake Champlain Sporting Goods Company, a wholesale supply company, engages independent sales agents to market the companys products throughout New York and Ontario. These agents currently receive a commission of 20 percent of sales, but they are demanding an increase to 25 percent of sales made during the year ending December 31, 20x4. The controller already prepared the 20x4 budget before learning of the agents demand for an increase in commissions. The budgeted 20x4 income statement is shown below. Assume that cost of goods sold is 100 percent variable cost.

Lake Champlain Sporting Goods Company, a wholesale supply company, engages independent sales agents to market the company's products throughout New York and Ontario. These agents currently receive a commission of 20 percent of sales, but they are demanding an increase to 25 percent of sales made during the year ending December 31, 20x4. The controller already prepared the 20x4 budget before learning of the agents' demand for an increase in commissions. The budgeted 20x4 income statement is shown below. Assume that cost of goods sold is 100 percent variable cost. LAKE CHAMPLAIN SPORTING GOODS COMPANY Budgeted Income Statement For the Year Ended December 31, 20x4 Sales Cost of goods sold $15,000,000 9,000,000 6,000,000 Gross margin Selling and administrative expenses $3,000,000 Commissions All other expenses (fixed) 90,000 3,090,000 Income before tax Income tax (35%) $2,910,000 1,018,500 es Net income $ 1,891,500 The company's management is considering the possibility of employing full-time sales personnel. Three individuals would be required, at an estimated annual salary of $27,000 each, plus commissions of 4 percent of sales. In addition, two sales managers would be employed at fixed annual salaries of $75,000 each. All other fixed costs, as well as the variable cost percentages, would remain the same as the estimates in the 20x4 budgeted income statement