Myerson Manufacturing Inc. manufactures networking equipment. The company has always been production oriented and sells its products through agents. Agents are paid a commission of 15 percent of the selling price. Myerson's budgeted income statement for 2012 is as follows: Exhibit A Myerson Manufacturing Inc. Budgeted Income Statement For the Year Ended December 31, 2012 [in thousands) Sales S 16,000 Manufacturing costs: Variable S 7,200 Fixed 2,340 9,540 Gross Margin 6,460 Selling and administrative expenses: Commissions S 2,400 Fixed marketing expenses 140 Fixed administrative expenses 1,780 4,320 Net operating income S 2,140 Less fixed interest income 540 Income before income taxes S 1,600 Less income taxes (30%) 480 Net income 1,120 After the profit plan was completed for 2012, Myerson's sales agents demanded that the commissions be increases to 22 14 percent. This demand was not acceptable to the company's president, Mr. Joe McGraw. He asked his sales manager, Maureen Perry, to estimate the cost to the company of having its own sales force. Perry's estimate of additional annual cost of having a sales force (the fixed market expense of $140,000 will still be incurred), exclusive of commissions, is as follows:Exhibit B Estimated Annual Cost of Employing a Company Sales Force (in thousands) Salaries: Sales manager S 100 Sales personnel 1,000 Travel and entertainment 400 Fixed marketing costs 900 Total S 2,400 Internal sales personnel would receive a commission of 10% of the selling price in addition to their salary. Required: a. Recast the budgeted "Gross Margin" income statement presented in Exhibit A to a budgeted contribution margin income statement. b. Assume that the company hopes to generate the same level of sales as in Exhibit A if the president accepts the sales agents' demand for additional commissions. What would be the net income? c. Assume that the company hopes to generate the same level of sales as in Exhibit A even if it switches to its own sales force. Present a contribution margin income statement and compute the net income. d. What should Mr. McGraw do