Subject: Sales Commissions in a Wholesale Firm; Income Taxes
CASE – Lake Champlain Sporting Goods Company, a wholesale supply company, engages independent sales agents to market the company’s products throughout New York and Ontario. These agents currently receive a commission of 20% of sales, but they are demanding an increase to 25% of sales made during the year ending December 31, 20X4 budget before learning of the agent’s demand for an increase in commissions.
The budgeted 20x4 income statement is shown below. Assume that cost of goods sold is 100% variable cost.