1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Molodets [167]
1 year ago
12

Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own;

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.
Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year. The statement follows:

As Barbara handed the statement to Karl Vecci, Pittman's president, she 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%.

"That's the last straw" Karl replied angrily. "Those agents have been demanding more and more, and this time they've gone too far. How can they possibly defend a 20% commission rate?"

"They claim that after paying for advertising, travel, and the other costs of promotion, there's nothing left over for profit," replied Barbara.

"I say it's just plain robbery," retorted Karl. "And I also say it's 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?

"We've already worked them up" said Barbara. "Several companies we know about 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 costs would increase by $2,400,000per year, but that would be more than offset by the $3,200,000(20 % Ã 16,000,000) that we would avoid on agents' commissions."
The breakdown of the $2,400,000 cost follows:

"Super," replied Karl. "And I noticed that the $2,400,000 is just what we're paying the agents under the old 15% commission rate."

"It's even better than that," explained Barbara. "We can actually save $75,000 a year because that's what we're having to pay the auditing firm now to check out the agents' reports. So our overall administrative costs would be less."

"Pull all of these numbers together and we'll show them to the executive committee tomorrow," said Karl. "With the approval of the committee, we can move on the matter immediately."

Compute the degree of operating leverage that the company would expect to have on December 31 at the end of next year assuming:
a. The agents' commission rate remains unchanged at 15%.
b. The agents' commission rate is increased to 20%.
c. The company employs its own sales force.
Use income before income taxes in your operating leverage computation.
Business
1 answer:
valentinak56 [21]1 year ago
4 0

A)Degree of operating leverage=Contribution/EBIT

=6400,000/2140000=2.99.

B) Degree of operating leverage=Contribution/EBIT

=5600,000/1340000=4.18

C) Degree of operating leverage=Contribution/EBIT

=7600,000/1015000=7.49

One conclusion that companies can draw from examining operational leverage is that companies that minimize fixed costs can increase profits without changing selling prices, contribution margins, or unit sales.

The Operating Leverage formula is used to calculate a company's break-even point, helping to set a reasonable selling price that covers all costs and produces a profit. This gives you insight into how well your company is using fixed-cost items such as inventory and machinery to make a profit. The more profit a company can extract from the same amount of fixed assets, the higher its operational leverage.

Learn more about operating leverage at

brainly.com/question/24278932

#SPJ4

You might be interested in
experts argue that, to limit the potential for war and other armed conflict, efforts by international bodies must be increased,
Elan Coil [88]

To limit the potential for war and other armed conflict, efforts by international bodies must be increased, particularly at United Nations well-known organization.

Many conflicts since the 1990s have been resolved either through UN mediation or through the action of third parties acting with UN support. Examples from the recent past include Nepal, Liberia, Burundi, the Sudan's north-south conflict, and Sierra Leone. A 40% decrease in conflict worldwide since the 1990s is attributed to UN peacemaking, peacekeeping, and conflict prevention activities, according to research. Many potential conflicts have been avoided through preventive action taken by the UN and other organizations. On the ground, 11 UN peace missions deal with post-conflict situations and implement peacebuilding strategies.

In about 30 nations or territories, the UN provides assistance in demining, including in Afghanistan, Colombia, the Democratic Republic of the Congo, Libya, and the Sudan. Thousands of civilians are killed or injured each year by landmines. The UN also promotes full international participation in treaties relating to landmines and provides instruction on how to avoid danger, aids victims in becoming self-sufficient, and helps nations destroy stockpiled landmines.

Learn more about United Nation (UN), here

brainly.com/question/9763405

#SPJ4

8 0
1 year ago
What budget item is NOT easy to lower if your salary is decreased?
zubka84 [21]
Well, insurance or taxes! :D
3 0
3 years ago
Economic Ordering Quantity (EOQ). The Gentry Garden Center sells 100,000 bags of lawn fertilizer annually. The optimal safety st
GalinKa [24]

Answer:

1. Annual demand ( D) = 100,000 bags

Ordering cost per order (Co) = $15

Holding cost per item per annum (H) = 15% x  $2 = $0.30

EOQ = √<u>2DCo</u>

                H

EOQ = √<u>2 x 100,000 x $15</u>

                  0.30

EOQ = 3,162 units

2. Maximum inventory

   = Safety stock + EOQ

   = 1,500 + 3,162

   = 4,662 units

3. Average inventory

   = EOQ/2

   = <u>3,162</u>

         2

   = 1,581 units

4. Number of order

   = <u>Annual demand</u>

            EOQ

   = <u>100,000</u>

        3,162

  = 32 times

       

Explanation:

EOQ is the square root of 2 multiplied by annual demand and ordering cost per order divided by  holding cost per item per annum.

Maximum inventory is the aggregate of safety stock and EOQ.

Average inventory is economic order quantity divided by 2

Number of order is the ratio of annual demand to economic order quantity.

3 0
3 years ago
Especially in terms of retail properties, which of the following attributes is considered the most likely to result in drastic v
weqwewe [10]

Answer:

C. Location attributes

Explanation:

According to my research on property value attributes, I can say that based on the information provided within the question the attribute that can drastically change a properties value is the Location Attribute. This is because Real Estate value depends mostly on it's location. For Example, if a house is in a good neighborhood it can be worth a lot more than a house in another location, but if that same neighborhood then becomes a drug trafficking/gang hotspot the price of that house drops drastically because no one wants to purchase it.

I hope this answered your question. If you have any more questions feel free to ask away at Brainly.

8 0
3 years ago
1. "The biggest thing when we talk about personal branding is that it’s a _________" a. Hard thing b. Waiting game c. Process d.
notsponge [240]

Answer:

1- c. Process.

2- d. Consistency.

Explanation:

A personal brand can be defined as a continuous process of using marketing efforts and developing different factors to increase the perception and reputation of a company, individual, group, institution, etc.

Personal brand management corresponds to a continuous process of action and positioning, so that the target audience that you want to reach through your brand, can get to know you, including the values ​​and the solution of the problems and benefits you have to offer.

This is a process that demands consistency of actions and posture, since the process of consolidating a personal brand is a continuous process that requires a lot of research, knowledge and analysis of trends and market, advertising, presence in the media most used by the public, demonstration of seriousness, quality, benefits, quick response to problems, and several other factors that gradually contribute so that through a consistent process the brand has value and is consolidated in the market.

8 0
3 years ago
Other questions:
  • 4. Which profession helps to make certain the workplace is safe? What do people in this profession do?
    12·2 answers
  • Portman Industries just paid a dividend of $1.68 per share. The company expects the coming year to be very profitable, and its d
    6·1 answer
  • Miser Materials paid $27,500 in dividends and $28,311 in interest over the past year while net working capital increased from $1
    6·1 answer
  • Max is designing a symbol for Clean Glow, a company that produces cleaning supplies. Once it is completed, the symbol will be le
    9·1 answer
  • Which of the following is a characteristic of both the sales approach for service-type warranties and the expense approach for a
    6·1 answer
  • Domestic Market for Steel, Alpha
    5·1 answer
  • The manager of Gloria's Boutique has approved Carla's application for 24 months of credit with maximum monthly payments of $70.I
    6·1 answer
  • Name the different levels of courts and describe their powers?
    12·1 answer
  • Under the Fair Labor Standards Act (FLSA), the overtime pay for workers is a rate that is lower than the minimum wage. decided b
    15·1 answer
  • The following selected accounts from the Pina Colada Corp.’s general ledger are presented below for the year ended December 31
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!