Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 7, Problem 55C
Niagra Falls Sporting Goods Company, a wholesale supply company, engages independent sales agents to market the company’s products throughout New York and Ontario. These agents currently receive a commission of 20 percent of sales, but they are demanding an increase to 25 percent of sales made during the year ending December 31, 20x2. The controller already prepared the 20x2 budget before learning of the agents’ demand for an increase in commissions. The budgeted 20x2 income statement is shown below. Assume that cost of goods sold is 100 percent variable cost.
The company’s sales manager, Joey Dulwich, is considering the possibility of employing full-time sales personnel. Three individuals would be required, at an estimated annual salary of $30,000 each, plus commissions of 5 percent of sales. In addition, a sales manager would be employed at a fixed annual salary of $160,000. All other fixed costs, as well as the variable cost percentages, would remain the same as the estimates in the 20x2
Required:
- 1. Compute Niagra Falls Sporting Goods’ estimated break-even point in sales dollars for the year ending December 31, 20x2, based on the budgeted income statement prepared by the controller.
- 2. Compute the estimated break-even point in sales dollars for the year ending December 31, 20x2, if the company employs its own sales personnel.
- 3. Compute the estimated volume in sales dollars that would be required for the year ending December 31, 20x2, to yield the same net income as projected in the budgeted income statement, if management continues to use the independent sales agents and agrees to their demand for a 25 percent sales commission.
- 4. Compute the estimated volume in sales dollars that would generate an identical net income for the year ending December 31, 20x2, regardless of whether Niagra Falls Sporting Goods Company employs its own sales personnel or continues to use the independent sales agents and pays them a 25 percent commission.
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Chapter 7 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
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Ch. 7 - List the most important assumptions of...Ch. 7 - Why do many operating managers prefer a...Ch. 7 - Prob. 13RQCh. 7 - East Company manufactures VCRs using a completely...Ch. 7 - When sales volume increases, which company will...Ch. 7 - What does the term sales mix mean? How is a...Ch. 7 - A car rental agency rents subcompact, compact, and...Ch. 7 - How can a hotels management use cost-volume-profit...Ch. 7 - How could cost-volume-profit analysis be used in...Ch. 7 - Prob. 20RQCh. 7 - Prob. 21RQCh. 7 - Explain briefly how activity-based costing (ABC)...Ch. 7 - Fill in the missing data for each of the following...Ch. 7 - Prob. 24ECh. 7 - Rosario Company, which is located in Buenos Aires,...Ch. 7 - The Houston Armadillos, a minor-league baseball...Ch. 7 - Prob. 27ECh. 7 - Europa Publications, Inc. specializes in reference...Ch. 7 - Tims Bicycle Shop sells 21-speed bicycles. For...Ch. 7 - A contribution income statement for the Nantucket...Ch. 7 - Refer to the income statement given in the...Ch. 7 - Hydro Systems Engineering Associates, Inc....Ch. 7 - Disk City, Inc. is a retailer for digital video...Ch. 7 - CollegePak Company produced and sold 60,000...Ch. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Consolidated Industries is studying the addition...Ch. 7 - Serendipity Sound, Inc. manufactures and sells...Ch. 7 - Prob. 41PCh. 7 - The European Division of Worldwide Reference...Ch. 7 - Prob. 43PCh. 7 - Celestial Products, Inc. has decided to introduce...Ch. 7 - Prob. 45PCh. 7 - Jupiter Game Company manufactures pocket...Ch. 7 - Prob. 47PCh. 7 - Condensed monthly income data for Thurber Book...Ch. 7 - Cincinnati Tool Company (CTC) manufactures a line...Ch. 7 - Ohio Limestone Company produces thin limestone...Ch. 7 - Prob. 51PCh. 7 - Colorado Telecom, Inc. manufactures...Ch. 7 - Prob. 53CCh. 7 - Prob. 54CCh. 7 - Niagra Falls Sporting Goods Company, a wholesale...
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