UDICIO Leney, 15 Lue as JUST Micale e ways $ 20,500,000 12,095,000 8,405,000 Pittman Company Budgeted Income Statement For the Year Ended December 31 Sales Manufacturing expenses Variable $ 9,225,800 Fixed overhead 2,870,000 Gross margin Selling and administrative expenses: Commissions to agents 3,075,800 Fixed marketing expenses 143,589 Fixed administrative expenses 1,980,000 Net operating income Fixed interest expenses Income before income taxes Income taxes (305) Net income 5,198,500 3,286,500 717,500 2,489, 290 746,789 $ 1,742,300 *Primarily depreciation on storage facilities. As Barbara handed the statement to Karl Veccl. Pittman's president, she commented, "I went ahead and commission rate in completing these statements, but we've just learned that they refuse to handle our Increase the commission rate to 20% "That's the last straw." Karl replied angrily. Those agents have been demanding more and more, and th How can they possibly defend a 209 commission rate? "They claim that after paying for advertising, travel, and the other costs of promotion, there's nothing left Barbara "I say it's just plain robbery," retorted kart. And I also say it's time we dumped those guys and got our own your people to work up some cost figures for us to look at?" "We've already worked them up," said Barbara, "Several companies we know about pay a 75% commissie along with a small salary. Of course, we would have to handle all promotion costs, too. We figure our fixed $3,075,000 per year, but that would be more than offset by the $4.100.000 (20% * $20,500,000) that we commissions The breakdown of the $3.075,000 cost follows: Salaries Sales manager Salespersons Travel and entertainment Advert $ 128,125 768, 750 512,500 1,665,625 53,075,000 Prey soft 1 a - G Required: 1 Compute Pittman Company's break even point in dollar sales for text year assuming a. The agents commission rate remains unchanged at 15% b. The agents commission rate is increased to 20% The company employs its own salen force 2. Assume that Pittman Company decides to continue selling through agents and pay the 20% commission rate. Determine the dollar soles that would be required to generate the same net income as contained in the budgeted income statement for next year. 3. Determine the dollar sales at which net income would be equal regardless of whether Pitoman Company sells through agents or 20% commission rate or employs its own sales force 4 Compute the degree of operating leverage that the company would expect to have at the end of next year assuming The agents commission to remains unchanged at 15% b The agents commission rate is increased to 20% The company employs its own salgs force Use income before income toes in your operating leverage computation Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Compute Pittman Company's break-even point in dollar sales for next year assuming: round CM ratio to 3 decimal places and finalauswers to the nearest dollar amount) Bakve Point The agents commision rate remains unchanged at 15% The agents commission rate is increased to 20% The company employs its own sa force Required 2 > Red Red Asume that Pittman County edes te contain that 20 codon Diethe dolor sits that would be an income scooted in the budget commentform yan (Round Method Required Neque he 11 NO Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required Regu Determine 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 salesforce. (Do not round Intermediate calculations atsast Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 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 answers to 2 decimal places Degree of Operating Leverage a b The agents commission rale remains unchanged at 15% The agents commission rate is increased to 20% The company employs its own sales force. c