90Marston Corporation Statement of Income for the Year Ending December 31, 2022Using Sales AgentsUsing Own Sales Force$26,000,000SalesCost of goods soldVariableFixedGross marginMarketing costsCommissionsFixed costsOperating income$11,700,0002,870,0004,680,0003,420,000$26,000,00014,570,00011,430,0008,100,000$ 3,330,000$11,700,0002,870,0002,600,0005,500,00014,570,00011,430,0008,100,000$ 3,330,000Marston is considering hiring its own sales staff to replace the network ofagents. Marston will pay its salespeople a commission of 10% and incuradditional fixed costs of $2,080,000.4Required1. Calculate Marston Corporation's 2022 contribution margin percentage,breakeven revenues, and degree of operating leverage under each of thetwo scenarios. (You will first have to recast the 2022 statement of incomeassuming Marston had hired its own sales staff.)2. Describe the advantages and disadvantages of each type of salesalternative.3. In 2023, Marston uses its own salespeople, who demand a 15%commission. If all other cost-behaviour patterns are unchanged, howmuch revenue must the salespeople generate in order to earn the sameoperating income as in 2022?

The contribution margin is computed by deducting the variable costs from the sales revenue. It is…

90 Marston Corporation Statement of Income for the Year Ending December 31, 2022 Using Sales Agents Using Own Sales Force $26,000,000 Sales Cost of goods sold Variable Fixed Gross margin Marketing costs Commissions Fixed costs Operating income $11,700,000 2,870,000 4,680,000 3,420,000 $26,000,000 14,570,000 11,430,000 8,100,000 $3,330,000 $11,700,000 2,870,000 2,600,000 5,500,000 14,570,000 11,430,000 8,100,000 $3,330,000 Marston is considering hiring its own sales staff to replace the network of agents. Marston will pay its salespeople a commission of 10% and incur additional fixed costs of $2,080,000. D Required 1. Calculate Marston Corporation's 2022 contribution margin percentage, breakeven revenues, and degree of operating leverage under each of the two scenarios. (You will first have to recast the 2022 statement of income assuming Marston had hired its own sales staff.) 2. Describe the advantages and disadvantages of each type of sales alternative. 3. In 2023, Marston uses its own salespeople, who demand a 15% commission. If all other cost-behaviour patterns are unchanged, how much revenue must the salespeople generate in order to earn the same in 2022?

90 Marston Corporation Statement of Income for the Year Ending December 31, 2022 Using Sales Agents Using Own Sales Force $26,000,000 Sales Cost of goods sold Variable Fixed Gross margin Marketing costs Commissions Fixed costs Operating income $11,700,000 2,870,000 4,680,000 3,420,000 $26,000,000 14,570,000 11,430,000 8,100,000 $3,330,000 $11,700,000 2,870,000 2,600,000 5,500,000 14,570,000 11,430,000 8,100,000 $3,330,000 Marston is considering hiring its own sales staff to replace the network of agents. Marston will pay its salespeople a commission of 10% and incur additional fixed costs of $2,080,000. D Required 1. Calculate Marston Corporation's 2022 contribution margin percentage, breakeven revenues, and degree of operating leverage under each of the two scenarios. (You will first have to recast the 2022 statement of income assuming Marston had hired its own sales staff.) 2. Describe the advantages and disadvantages of each type of sales alternative. 3. In 2023, Marston uses its own salespeople, who demand a 15% commission. If all other cost-behaviour patterns are unchanged, how much revenue must the salespeople generate in order to earn the same in 2022?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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