If OMS continues to sell through the independent sales agents and pays the higher commission rate (20% instead of 15%), compute the estimated sales dollars that would be required to generate the level of profit as projected in the budgeted income statement. Omega Medical Supplies Pte Ltd (OMS) is a small but growing manufacturer of medicalequipment. Due to its small set-up, the company does not have a sales force of its own, butrelies entirely on independent sales agents to market its products.The independent sales agents are paid a commission of 15% of sales. This is reflected in thebudget for the new financial year ending 31 December 2022, as follows:(S'000)(S'000)16,000SalesCost of goods soldVariableFixed7,2009,5406,4602.340Gross profitSelling, general and administrative expensesAgents' commissionsFixed advertising expensesFixed general and administrative expensesProfit before interest and taxes2,4001201,8004,3202,140Fixed interest expenseProfit before taxes5401,600Тах еxpense272Profit after tax1,328 Subsequent to the approval of the budgets for the year ending 31 December 2022, OMS wasinformed that independent sales agents demanded for an increase in commission rate to 20%for 2022 to cover for advertising, travel and other promotional costs. This effectively renderedthe approved budgets invalid.The founder of OMS, Denzel was indignant that they had to be subjected to the unfoundedrequest by the independent sales agents, and commissioned an urgent study of hiring its ownsales team.After a detailed analysis, the financial controller proposed to engage the company's own salesteam, providing a 7.5% sales commission and a base salary, which is comparable to marketrates. However, the company will have to handle all advertising and promotional activitiesinternally.Under the new proposal, fixed costs would increase by $2,400,000 (see below for details), butthis would be better than having to pay the independent sales agents a commission of$3,200,000 (20% of $16,000,000).($'000)Salaries of sales teamSales managerSales personsTravel and entertainment100600400Advertising and promotion1,3002,400Denzel was very pleased with the proposal, commenting that the $2,400,000 is exactly the sameas what the company would have paid under the 15% commission rate. In addition, there wouldbe additional savings of $75,000 from auditing fees paid to verify the agents' sales reports. Inother words, general and admin expenses will decrease by $75,000. He has asked the financialcontroller to tidy up the proposal quickly and get the new budget approved.

('$000) ('$000) Sales 16000 Cost of Good Sold Variable 7200 Fixed 2340…

Denzel was very pleased with the proposal, commenting that the $2,400,000 1s exactly the same as what the company would have paid under the 15% commission rate. In addition, there would be additional savings of $75,000 from auditing fees paid to verify the agents' sales reports. In other words, general and admin expenses will decrease by $75,000. He has asked the financial controller to tidy up the proposal quickly and get the new budget approved.

Denzel was very pleased with the proposal, commenting that the $2,400,000 1s exactly the same as what the company would have paid under the 15% commission rate. In addition, there would be additional savings of $75,000 from auditing fees paid to verify the agents' sales reports. In other words, general and admin expenses will decrease by $75,000. He has asked the financial controller to tidy up the proposal quickly and get the new budget approved.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Evaluate the following statements related to creating budget: I. In a production budget if the number of units in the finished goods inventory at the end of the period is less than the number of units in the finished goods inventory at the beginning of the period then the expected number of units sold is less than the number of units to be produced during the period Ii. in the merchandise purchases budget, the required purchases in units for a period can be determined by subtracting the beginning merchandise Inventory in units from the total of budgeted sales in unit and desired ending merchandise inventory (unit) III. When preparing a direct materials budget the beginning inventory for raw materials should be added to production needs, and the desired ending inventory should be subtracted to determine the amount of raw materials to be purchased Answer: ???
arrow_forward Question .(iii) To help achieve the budgeted sales for the year, Sampson is about to introduce bonuses for itssales staff. The bonuses will be an increasing percentage of the gross sales made, by eachsalesperson, above certain monthly targets.(iv) The company is using a new general ledger software package. The financial controller is impressedwith the new system, because management accounts are easily produced and allow detailedcomparisons with budgets and prior-period figures across product lines and geographical areas.The conversion to the new system occurred with a minimum of fuss. As it is a popular computerpackage, it required only minor modifications.(v) As part of the conversion, the position of systems administrator was created. This position isresponsible for all systems maintenance, including data backups and modifications. These taskswere the responsibility of the accountant.Required:For each of the scenarios above, explain how the components of…
1. The following is true of the operational budget, except for: Select one: a. It has a short-term focus, usually one-year b. It sets a plan for the purchase of assets c It is concerned with the cash effect of sales and expenses d. It contains a production budget
Do not give image format
Crane Company has accumulated the following budget data for the year 2022. 1. Sales: 31,100 units, unit selling price $85. 2. Cost of one unit of finished goods: direct materials 1 pound at $5 per pound, direct labor 3 hours at $12 per hour, and manufacturing overhead $6 per direct labor hour. 3. Inventories (raw materials only): beginning, 10,100 pounds; ending, 15,100 pounds. 4. Selling and administrative expenses: $170,000; interest expense: $30,000. 5. Income taxes: 20% of income before income taxes.
1. What is the total budgeted indirect cost at the Elmore store in January 2018? What is the total budgeted cost of each activity at the Elmore store for January 2018? What is the budgeted indirect cost of each product category for January 2018? 2. Which product category has the largest fraction of total budgeted indirect costs? 3. Given your answer in requirement 2, what advantage does Maclin's Corner gain by using an activity-based approach to budgeting over, say, allocating indirect costs to products based on cost of goods sold?
How do you determine the cash pay back period for a proposed production purchased, assuming a monthly cash flow from the cash budget?
LB Enterprises (LB) is preparing its budget for the first quarter of 2019. LB's balance sheet as of December 31, 2018 is as follows: Assets Liabilities Cash $5,000 Accounts Payable $9500 Accounts Recievable 28,000 Inventories Direct Materials 8,100 Finished Goods (500 Units) 16,870 Stockholders Equity Equipment - gross 45,000 Accumulated depreciation 15.000 Common Stock $15,000 Net Equipment 30,000 Retained Earnings 63,470 Total Assets $87,970 Total Liabilities and $87,960 Equity LB sells one product for $45/unit. The Company forecasts that it will sell 2,000; 1,500; 1,600; and 1,700 units in January, February, March and April, respectively. • Sales to customers are all on credit. 40% of the cash for these sales is collected in the month of the sale and the remaining 60% is collected in the following month. LB wants finished goods inventory equal to 25% of the next month's sales on hand at the end of each month. LB wants direct materials equal to 75% of the current month's production…
Coronado Industries had sales in 2021 of $5,521,600 and gross profit of $893,200. Management is considering two alternative budget plans to increase its gross profit in 2022.Plan A would increase the unit selling price from $8.00 to $8.40. Sales volume would decrease by 101,500 units from its 2021 level. Plan B would decrease the unit selling price by $0.50. The marketing department expects that the sales volume would increase by 105,560 units.At the end of 2021, Coronado has 32,480 units of inventory on hand. If Plan A is accepted, the 2022 ending inventory should be 28,420 units. If Plan B is accepted, the ending inventory should be equal to 48,720 units. Each unit produced will cost $1.5 in direct labor, $1.3 in direct materials, and $1.2 in variable overhead. The fixed overhead for 2022 should be $1,538,740.
How do I solve for the chart?
Gibson Corporation, which has three divisions, is preparing its sales budget. Each division expects a different growth rate because economic conditions vary in different regions of the country. The growth expectations per quarter are 4 percent for Cummings Division, 2 percent for Springfield Division, and 6 percent for Douglas Division. Required a. Complete the sales budget by filling in the missing amounts. b. Determine the amount of sales revenue that the company will report on its quarterly pro forma income statements. Complete this question by entering your answers in the tabs below. Required A Required B Complete the sales budget by filling in the missing amounts. Note: Round your final answers to the nearest whole dollar amount. Division First Quarter Second Quarter Third Quarter Fourth Quarter Cummings Division $ 160,000 Springfield Division 390,000 Douglas Division 260,000 Required A Required B >
Which term is used to represent the sales level that results in a project's net income exactly equalling zero? Group of answer choices Cash breakeven Operational breakeven Present value breakeven Financial breakeven Accounting profit breakeven