Cellular First The sales department of a cellular phone company pays its salespeople $1,500 per...

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Cellular First The sales department of a cellular phone company pays its salespeople $1,500 per month plus 25 percent of each new subscriber’s first month’s billings. A new subscriber’s first-month bill averages $80. Salespeople work 160 hours a month (four weeks at 40 hours per week). If salespeople work more than 160 hours per month, they receive $12 per hour for hours in excess of 160. Sales leads for the sales department are generated in a variety of ways—direct mailings to potential customers who then call to speak to a salesperson, lists of prospective customers purchased from outside marketing firms, and so forth. The manager of the sales department reviews potential leads and assigns them to particular salespeople who contact them. The manager of the sales department is expected to oversee the time spent by each salesperson per assigned lead and to approve overtime requests to work beyond the 40 hours per week. Each new customer added requires on average 2 hours of salesperson time to make the sale. Last month, the sales department was budgeted for eight full-time salespeople. However, because of a new ad campaign, an additional salesperson was hired and overtime was approved, bringing actual hours worked up to 1,580. The department added 725 new customers.

Robert · Accepted Answer

a) 
PERFORMANCE ACTUAL STATIC BUDGET VARIANCE
SALES REVENUE 58,000 51,200 6800 favourable
LESS: EXPENSE
SALARIES 13500 12,000 1500 unfavourable
COMMISSION 14500 12800 1700 unfavourable
OVERTIME 1680 1600 unfavourable
NET INCOME $28320 $26400 1920 favourable
  
Actual budget : 
9 employees worked * 160 hours per employee = 1440 hours 
Customer = 725 
Sales = 725 * $80= $58,000 
Salaries =$1500  * 9 employees =$13500 
Commissions =  725 * $20 = $14500 
Commissions rate = 25 %  of new subscriber’s  billing  amount = $80 * 25/100=$20 
Over time :

Cellular First The sales department of a cellular phone company pays its salespeople $1,500 per month plus 25 percent of each new subscriber’s first month’s billings. A new subscriber’s first-month...

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