Management Accounting II
Marston Corporation manufactures disposable thermometers that are sold to hospitals by using a network of independent phone sales agents located in the us and Canada. The sales people sell a number of products to hospitals furthermore to Marston's disposable thermometer. The sales agents are currently paid out an 18% commission on sales, and this commission charge was used when Marston's supervision prepared the subsequent budgeted profits statement to get the approaching year. Marston Corporation Budgeted Income Affirmation Sales Cost of goods sold: Variable Fixed Gross perimeter Selling and administrative expenses: Commissions Set advertising expenses Fixed administrative expenses Net operating profits $30, 1000, 000 $17, 400, 1000 2, 800, 000
twenty, 200, 1000 9, 800, 000
five, 400, 1000 800, 500 3, 2 hundred, 000
being unfaithful, 400, 1000 $400, 500
Since the completion of the above statement, Marston's administration has found that the self-employed sales agents are demanding a rise in the commission rate to 20% of sales pertaining to the upcoming year. This may be the third increase in commissions demanded by the self-employed sales agents in five years. As a result, Marston management offers decided to research the possibility of hiring its own sales staff to change the self-employed sales agents. Marston's controller estimates that the organization will have to hire eight salesmen to cover the present market location, and the total annual payroll cost of these types of employees will be about $700, 000, including fringe rewards. The salesmen will also be paid out commissions of 10% of sales. Travel and entertainment expenses are expected to total regarding $400, 000 for the year. The company will likely have to work with a product sales manager and support staff whose wages and fringe benefits can come to $200, 000 each year. To make on with the marketing promotions that the 3rd party sales agents had been running on behalf of
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