question archive Pittman Company is a small but growing manufacturer of telecommunications equipment
Pittman Company is a small but growing manufacturer of telecommunications equipment
Subject:AccountingPrice: Bought3
Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its ow rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for tems sold. Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows: Budgeted Income Statement Salen 25,000,000 Manufacturing expenses Variable Fixed overhead $11,250,000 Gross margin Selling and administrative expenses 3,500,000 14,750,000 10,250,000 Commissions to agents Pixed marketing expenses Fixed administrative expenses 3,750,000 175,000* 2,160,0006 Net operating income Fixed interest expenses Income before income taxes Income taxes (30%) Net income 6,085,000 4,165,000 875,00 3,290,000 987,000 2,303,000 Primarily depreciation on storage facilities. As Barbar commission rate in completing these statements, but we've just learned that they refuse to handle increase the commission rate to 20%." a handed the statement to Kari Vecc, Pittman's president, she commented."I went ahead and used the agents' 15% our products next year unless we That's the last straw," Karl replied angrily. How can they possibly defend a 20% commission rate?" Those agents have been demanding more and more, and this time they've gone too far
