Seco Corp., a wholesale supply company, uses independent sales agents to market the company's products. These agents currently receive a commission of 20% of sales, but are demanding an increase to 25% of sales. Seco had already prepared its budget for next year before learning of the sales agent's demand for an increase in commissions. That budgeted income statement appears below: SECO CORP. Budgeted Income Statement Sales 10,000,000 Cost of sales 6,000,000 Gross margin 4,000,000 Selling and administrative expenses: Commissions 2,000,000 All other expenses (fixed) 100,000 2,100,000 Net income 1,900,000 Seco is considering the possibility of employing its own salespersons. Three individuals would be required, at a salary of P30,000 each, plus commissions of 5% of sales. In addition, a sales manager would be employed at a fixed annual salary of P160,000. Compute the peso sales required to attain the target profit of P1,900,000, assuming that the company continues to use independent sales agents and the company agrees to their demand for a 25% sales commission.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Seco Corp., a wholesale supply company, uses independent sales agents to market the company's products.
These agents currently receive a commission of 20% of sales, but are demanding an increase to 25% of sales. Seco
had already prepared its budget for next year before learning of the sales agent's demand for an increase in
commissions. That
SECO CORP.
Budgeted Income Statement
Sales 10,000,000
Cost of sales 6,000,000
Gross margin 4,000,000
Selling and administrative expenses:
Commissions 2,000,000
All other expenses (fixed) 100,000 2,100,000
Net income 1,900,000
Seco is considering the possibility of employing its own salespersons. Three individuals would be required, at a salary of P30,000 each, plus commissions of 5% of sales. In addition, a sales manager would be employed at a fixed annual salary of P160,000.
Compute the peso sales required to attain the target profit of P1,900,000, assuming that the company continues to use independent sales agents and the company agrees to their demand for a 25% sales commission.
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