Bonita Beauty Corporation manufactures cosmetic products that are

sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2017, is as follows. BONITA BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2017

Sales$73,900,000

Cost of goods sold Variable$31,777,000 Fixed8,910,000 total COGS40,687,000

Gross profit$33,213,000

Selling and marketing expenses Commissions$13,302,000 Fixed costs10,937,000 total 24,239,100 Operating income$8,973,900

The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 7% and incur additional fixed costs of $8,129,000.

Questions

1.Under the current policy of using a network of sales agents, calculate the Bonita Beauty Corporation's break-even point in sales dollars for the year 2017. (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answers to 0 decimal places, e.g. 2,510.)

2.Calculate the company's break-even point in sales dollars for the year 2017 if it hires its own sales force to replace the network of agents. (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answers to 0 decimal places, e.g. 2,510.)

3.Calculate the degree of operating leverage at sales of$73,900,000 if (1) Bonita Beauty Corporation uses sales agents, (2)Bonita Beauty Corporation employees its own sales staff. (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answers to 0 decimal places, e.g. 2,510.)

Degree of operating leverage

(1)Bonita Beauty Corporation uses sales agents____________

(2)Bonita Beauty Corporation employees its own sales staff_____________

4.Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending December 31, 2017, regardless of wether Bonita Beauty employs its own sales staff and pays them 7% commission or continuous to use the independent network of agents.

estimated sale volume $_____________