Colorado Telecom, Inc. manufactures telecommunications equipment. The company has always been production oriented and sells its products through agents. Agents are paid a commission of 15 percent of the selling price. Colorado Telecom's budgeted income statement for 20x2 follows:

After the profit plan was completed for the coming year, Colorado Telecom's sales agents demanded that the commissions be increased to 22½ percent of the selling price. This demand was the latest in a series of actions that Liliana Richmond, the company's president, believed had gone too far. She asked Molly Rosewood, the most sales-oriented officer in her production-oriented company, to estimate the cost to the company of employing its own sales force. Rosewood's estimate of the additional annual cost of employing its own sales force, exclusive of commissions, follows. Sales personnel would receive a commission of 10 percent of the selling price in addition to their salary.
Estimated Annual Cost of
Employing a Company Sales Force
(in thousands)
Salaries:
Sales manager........................................................................................................ $ 100
Sales personnel...................................................................................................... 1,000
Travel and entertainment......................................................................................... 400
Fixed marketing costs.............................................................................................. 900
Total.................................................................................................................... $2,400
Required:
1. Calculate Colorado Telecom's estimated break-even point in sales dollars for 20x2.
a. If the events that are represented in the budgeted income statement take place.
b. If the company employs its own sales force.
2. If Colorado Telecom continues to sell through agents and pays the increased commission of 22½ percent of the selling price, determine the estimated volume in sales dollars for 20x2 that would be required to generate the same net income as projected in the budgeted income statement.
3. Determine the estimated volume in sales dollars that would result in equal net income for 20x2 regardless of whether the company continues to sell through agents and pays a commission of 22½ percent of the selling price or employs its own sales force.

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COLORADO TELECOM, INC. Budgeted Income Statement For the Year Ended December 31, 20x2 (In thousands) $16,000 Sales Manufacturing costs: $7,200 2,340 9,540 6,460 Gross margin Selling and administrative expenses: Commissions Fixed marketing expenses Fixed administrative expenses $2,400 140 1.780 4,320 2,140 540 1,600 480 1,120 Net operating income Income before income taxes Less income taxes (30%) Net income