Since the completion of the above statement, Marstons management has learned that the independent sales agents are demanding an increase in the commission rate to 19% of sales for the upcoming year. This would be the third increase in commissions demanded by the independent sales agents in five years. As a result, Marstons management has decided to investigate the possibility of hiring its own sales staff to replace the independent sales agents.

Marston's controller estimates that the company will have to hire eight salespeople to cover the current market area, and the total annual payroll cost of these employees will be about $670,000, including fringe benefits. The salespeople will also be paid commissions of 10% of sales. Travel and entertainment expenses are expected to total about $380,000 for the year. The company will also have to hire a sales manager and support staff whose salaries and fringe benefits will come to $100,000 per year. To make up for the promotions that the independent sales agents had been running on behalf of Marston, management believes that the companys budget for fixed advertising expenses should be increased by $470,000.

Required:
1.	Assuming sales of $33,000,000, construct a budgeted contribution format income statement for the upcoming year for each of the following alternatives:

a.

The independent sales agents' commission rate remains unchanged at 17%. (Input all amounts as positive values except losses which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in thousands. Round your percentage answers to the nearest whole percent.)

(Click to select)Fixed administrative expenseContribution marginFixed cost of goods soldNet operating income (loss)Fixed marketing staff expenseVariable cost of goods soldSalesFixed advertising expenseCommissions	$	%
Variable expenses:
(Click to select)Contribution marginFixed marketing staff expenseFixed administrative expenseFixed advertising expenseCommissionsSalesVariable cost of goods soldNet operating income (loss)Fixed cost of goods sold	$
(Click to select)Fixed cost of goods soldSalesFixed administrative expenseFixed marketing staff expenseCommissionsVariable cost of goods soldFixed advertising expenseNet operating income (loss)Contribution margin
Total variable expense		%
(Click to select)Fixed marketing staff expenseSalesContribution marginCommissionsFixed administrative expensesNet operating income (loss)Variable cost of goods soldFixed advertising expenseFixed cost of goods sold		%
Fixed expenses:
(Click to select)SalesFixed administrative expenseFixed marketing staff expenseNet operating income (loss)CommissionsFixed cost of goods soldFixed advertising expenseVariable cost of goods soldContribution margin
(Click to select)Fixed marketing staff expenseSalesCommissionsContribution marginFixed administrative expenseFixed advertising expenseVariable cost of goods soldNet operating income (loss)Fixed cost of goods sold
(Click to select)Net operating income (loss)CommissionsFixed administrative expenseFixed advertising expenseFixed marketing staff expenseSalesContribution marginFixed cost of goods soldVariable cost of goods sold
(Click to select)Contribution marginSalesNet operating income (loss)Variable cost of goods soldCommissionsFixed advertising expenseFixed administrative expenseFixed marketing staff expenseFixed cost of goods sold
Total fixed expenses
(Click to select)Contribution marginNet operating income (loss)CommissionsSalesFixed administrative expensesFixed advertising expenseVariable cost of goods soldFixed cost of goods soldFixed marketing staff expense	$

b.

The independent sales agents' commission rate increases to 19%. (Input all amounts as positive values except losses which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in thousands. Round your percentage answers to the nearest whole percent.)

(Click to select)Net operating income (loss)Fixed administrative expenseCommissionsSalesFixed cost of goods soldFixed advertising expenseContribution marginVariable cost of goods soldFixed marketing staff expense	$	%
Variable expenses:
(Click to select)Fixed administrative expenseFixed marketing staff expenseSalesContribution marginCommissionsVariable cost of goods soldFixed advertising expenseFixed cost of goods soldNet operating income (loss)	$
(Click to select)Fixed administrative expenseFixed cost of goods soldFixed advertising expenseSalesFixed marketing staff expenseVariable cost of goods soldCommissionsContribution marginNet operating income (loss)
Total variable expense		%
(Click to select)Variable cost of goods soldFixed marketing staff expenseFixed cost of goods soldNet operating income (loss)Fixed advertising expenseCommissionsSalesContribution marginFixed administrative expenses		%
Fixed expenses:
(Click to select)Contribution marginFixed cost of goods soldFixed administrative expenseFixed marketing staff expenseCommissionsSalesNet operating income (loss)Fixed advertising expenseVariable cost of goods sold
(Click to select)SalesFixed advertising expenseCommissionsFixed marketing staff expenseNet operating income (loss)Fixed administrative expenseVariable cost of goods soldFixed cost of goods soldContribution margin
(Click to select)Fixed administrative expenseFixed cost of goods soldFixed marketing staff expenseNet operating income (loss)Variable cost of goods soldCommissionsContribution marginFixed advertising expenseSales
(Click to select)CommissionsFixed marketing staff expenseSalesContribution marginFixed administrative expenseNet operating income (loss)Fixed advertising expenseFixed cost of goods soldVariable cost of goods sold
Total fixed expenses
(Click to select)Fixed marketing staff expenseNet operating income (loss)Variable cost of goods soldFixed advertising expenseSalesCommissionsContribution marginFixed administrative expensesFixed cost of goods sold	$

c.	The company employs its own sales force. (Input all amounts as positive values except losses which should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in thousands. Round your percentage answers to the nearest whole percent.)

(Click to select)Contribution marginFixed advertising expenseCommissionsVariable cost of goods soldFixed cost of goods soldNet operating income (loss)Fixed administrative expenseSalesFixed marketing staff expense	$	%
Variable expenses:
(Click to select)Contribution marginCommissionsFixed advertising expenseSalesFixed marketing staff expenseFixed cost of goods soldNet operating income (loss)Variable cost of goods soldFixed administrative expense	$
(Click to select)Variable cost of goods soldFixed administrative expenseContribution marginFixed marketing staff expenseNet operating income (loss)Fixed advertising expenseCommissionsFixed cost of goods soldSales
Total variable expense		%
(Click to select)Fixed marketing staff expenseFixed advertising expenseFixed cost of goods soldFixed administrative expensesVariable cost of goods soldCommissionsSalesNet operating income (loss)Contribution margin		%
Fixed expenses:
(Click to select)CommissionsVariable cost of goods soldContribution marginFixed advertising expenseSalesNet operating income (loss)Fixed cost of goods soldFixed administrative expenseFixed marketing staff expense
(Click to select)Fixed administrative expenseNet operating income (loss)Fixed advertising expenseCommissionsFixed marketing staff expenseVariable cost of goods soldFixed cost of goods soldSalesContribution margin
(Click to select)CommissionsContribution marginVariable cost of goods soldFixed marketing staff expenseSalesNet operating income (loss)Fixed cost of goods soldFixed administrative expenseFixed advertising expense
(Click to select)Contribution marginVariable cost of goods soldNet operating income (loss)Fixed administrative expenseCommissionsFixed advertising expenseSalesFixed cost of goods soldFixed marketing staff expense
Total fixed expenses
(Click to select)Contribution marginNet operating income (loss)SalesFixed cost of goods soldFixed marketing staff expenseFixed administrative expensesFixed advertising expenseCommissionsVariable cost of goods sold	$