Can I get an answer for c. and 2. Thanks CVP Project Data Accounting 1B Trump Co

Question

Can I get an answer for c. and 2. Thanks

CVP Project Data Accounting 1B Trump Company is a small but growing manufacturer of telecommunications equipment The company does not have its own sales force; rather, it relies completely on independent sales agents to market its products. These agents are paid a commission of 15% of selling price for all items sold Paul Ryan, Trump' s controller has just prepared the company's budgeted income statement for next year The statement follows TRUMP COMPANY BUDGETED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31 SALES MANUFACTURING COSTS $16,000,000 VARIABLE FIXED $7,200,000 2,340,000 9,540 000 6,460,000 GROSS MARGIN SELLING&ADMIN; COSTS COMMISSION TO AGENTS FIXED MARKETING COSTS FIXED ADMIN COSTS 2,400,000 120,000* 1,800,0004,320,000 2,140 000 NET OPERATING INCOME primarily depreciation on storage facilities As Ryan handed the statement to Donald Trump, Trump's president, he commented, "I went ahead and used the agents, 15% commission rate in completing these statements, but we've just learned that they refuse to handle our products next year unless we increase the commission rate to 20% Mr. Trump replied angrily. "Those agents have been demanding more and more and this time they have gone too far How can they possibly defend a 20% commission rate?" I say it's time we dumped those guys and got our own sales force Ryan replied "We've already worked them up. Several companies we know pay about 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 costs would increase by $2,400,000 per year, but we do not have to pay $3.200,000 20% x $16,000,000) commissions to the agents . The breakdown of the $2,400,000 cost figure is as follows Salaries Sales manager Salespersons Travel and Entertainment Advertising $ 100,000 600,000 400,000 Total $2.400.000 Super," replied Mr. Trump. 'and I note that the $2,400,000 is just what we are paying the agents under the old 15% commission rate .

Explanation / Answer

c.

2. Volume of sales required to achieve a net operating income of $2,140,000 with 20% sales commission : $18,285,714

Working:   

TRUMP COMPANY Contribution income statement - with own sales personnel Amount % Sales 16000000 100.00% Variable Expenses           Manufacturing costs 7200000 45.00%           Sales commision (7.5%) 1200000 7.50%       Total variable expenses 8400000 52.50%    Contribution margin 7600000 47.50% Fixed expenses     Manufacturing 2340000 14.63%     Sales Salaries 2400000 15.00%     Marketing 120000 0.75%     Administration 1725000 10.78% Total fixed expenses 6585000 41.16% Net operating income 1015000 6.34% Own sales personnel have to be paid 7.5% commision on sales

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.