This is a case question with 4 bar charts that need answers in certain situations. It has to do with Managerial Accounting 18th edition. It relates to Cost-Volume-Profit Analysis. The questions for the 4 charts are at the bottom that need, break-even points, 2 with volume of sales in dollars, and 3 with degree of operating leverage. Thanks.

Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Barbara Cheney, Pittmans controller, just prepared the companys budgeted income statement for next year as follows: Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales $ 25,500,000 Manufacturing expenses: Variable $ 11,475,000 Fixed overhead 3,570,000 15,045,000 Gross margin 10,455,000 Selling and administrative expenses: Commissions to agents 3,825,000 Fixed marketing expenses 178,500* Fixed administrative expenses 2,180,000 6,183,500 Net operating income 4,271,500 Fixed interest expenses 892,500 Income before income taxes 3,379,000 Income taxes (30%) 1,013,700 Net income $ 2,365,300 *Primarily depreciation on storage facilities. As Barbara handed the statement to Karl Vecci, Pittmans president, she commented, I went ahead and used the agents 15% commission rate in completing these statements, but weve just learned they refuse to handle our products next year unless we increase the commission rate to 20%. Thats the last straw, Karl replied angrily. Those agents have been demanding more and more, and this time theyve gone too far. How can they possibly defend a 20% commission rate? They claim after paying for advertising, travel, and the other costs of promotion, theres nothing left over for profit, replied Barbara. Thats ridiculous, retorted Karl. And I also say its time we dumped those guys and got our own sales force. Can you get your people to work up some cost figures for us to look at? Weve already worked them up, said Barbara. Several companies we know of pay a 7.5% commission to their own salespeople, along with a small salary. Of course, we would have to handle all promotion costs, too. We figure our fixed expenses would increase by $3,825,000 per year, but that would be more than offset by the $5,100,000 (20% $25,500,000) we would avoid on agents commissions. The breakdown of the $3,825,000 cost follows: Salaries: Sales manager $ 159,375 Salespersons 956,250 Travel and entertainment 637,500 Advertising 2,071,875 Total $ 3,825,000 Super, replied Karl. And I noticed the $3,825,000 equals what were paying the agents under the old 15% commission rate. Its even better than that, explained Barbara. We can actually save $117,300 a year because thats what were paying our auditors to check out the agents reports. So our overall administrative expenses would be less. Pull all of these numbers together and well show them to the executive committee tomorrow, said Karl. With the approval of the committee, we can move on the matter immediately.

Required: Compute Pittman Companys break-even point in dollar sales for next year assuming: The agents commission rate remains unchanged at 15%. The agents commission rate is increased to 20%. The company employs its own sales force. Assume Pittman Company decides to continue selling through agents and pays the 20% commission rate. Calculate the dollar sales required to generate the same net income as contained in the budgeted income statement for next year. Calculate the dollar sales at which net income would be equal regardless of whether Pittman Company sells through agents (at a 20% commission rate) or employs its own sales force. Compute the degree of operating leverage the company would expect to have at the end of next year assuming: The agents commission rate remains unchanged at 15%. The agents commission rate is increased to 20%. The company employs its own sales force.

Use income before income taxes in your operating leverage computation. I need 4 required charts filled in: With labels and numbers.

Required 1: Chart Answer Needed Break even point

a. The agent's commission rate remains unchanged at 15%, Answer

The agent's commission rate is increased to 20%, Answer

The company employs its own sales force, Answer

2. Assume that Pittman Company decides to continue selling through agents and pays the 20% commission rate. Calculate the dollar sales that would be required to generate the same net income as contained in the budgeted income statement for next year.

Note: Round CM ratio to 3 decimal places and final answer to the nearest dollar amount.

Answer Volume of sales (in dollars) ?

3. Use income before income taxes in your operating leverage computation. Calculate the dollar sales at which net income would be equal regardless of whether Pittman Company sells through agents (at a 20% commission rate) or employs its own sales force.

Volume of sales (in dollars) - Answer?

Once again, use income before income taxes in your operating leverage computation. Question 4: Compute the degree of operating leverage that the company would expect to have at the end of next year assuming: (Use income before income taxes in your operating leverage computation.) Round your answer to 2 decimal places.

Question chart 4: Answer needed

Degree of operating leverage (?)

a.The agent's commission rate remains unchanged at 15%, Answer?

b.The agent's commission rate is increased to 20%, Answer?

c.The company employs its own sales force. Answer?