case study 333 - CASE 3-33 Cost Structure; Break-Even and...

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CASE 3-33 Cost Structure; Break-Even and Target Profit Analysis[LO3–4, LO3–5, LO3–6]Pittman Company is a small but growing manufacturer of telecommunications equipment. Thecompany has no sales force of its own; rather, it relies completely on independent sales agents tomarket its products. These agents are paid a sales commission of 15% for all items sold.Barbara Cheney, Pittman’s controller, has just prepared the company’s budgeted incomestatement for next year. The statement follows:Pittman Company Budgeted Income Statement For the Year Ended December 31Sales. . . . . . . . . . . . . . . . . . .$16,000,000Manufacturing expenses:Variable. . . . . . . . . . . . . . . . . . . . .$7,200,000Fixed overhead. . . . . . . . . . . . . . .2,340,0009,540,000Gross margin. . . . . . . . . . . . . . . . .6,460,000Selling and administrative expenses:Commissions to agents. . . . . . . . . . . . . . .2,400,000Fixed marketing expenses. . . . . . . . . . . .1,20,000Fixed administrative expenses. . . . . . .1,800,0004,320,000Net operating income . . . . . . . . . . . . . .2,140,000*
Pittman Company Budgeted Income Statement For the Year Ended December 31Fixed interest expenses . . . . . . . . . . .540,000Income before income taxes. . . . . . . . . .1,600,000Income taxes (30%). . . . . . . . . . . . . . . . .480,000Net income. . . . . . . . . . . . . . . . . . . . . .$ 1,120,000Primarily depreciation on storage facilities

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Term
Fall
Professor
amnashah
Tags
Revenue, Sales, Net Income, sales force, commission rate, Compute Pittman Company

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