Chapter 5 - Cost Structure, Break-Even, and Target Profit Analysis

Brothers Company, LLC is a manufacturer of telecommunications equipment. To market its products, the company uses independent sales agents. The agents are paid a sales commission of 15% of the selling price of all items sold.

Laura Lee, Brothers Company, LLC's controller, has just prepared the company's budgeted income statement for next year as follows:

[fable used in Chapter 5 Case Study. Completion if this table will help you to answer questions 1 5. Enter the dollar amounts for all line items. Enter the percentages for sales, total variable expenses, and contribution margin. 15% Commission 20% Commission Own Sales Force Sales S 100 % S 100 % S 100.0 % Variable expenses: Manufacturing Commissions (15%, 20%, 7.5%) Total variable expenses % % % Contribution margin % % % Fixed expenses: Manufacturing overhead Marketing Administrative Interest Total fixed expenses Income before income taxes Income taxes (30%) Net income S S S