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 Telecoms budgeted income statement for 20x2 follows:

COLORADO TELECOM, INC.
Budgeted Income Statement
For the Year Ended December 31, 20x2
(in thousands)
Sales				$	22,000
Manufacturing costs:
Variable	$	7,500
Fixed overhead		2,340			9,840
Gross margin				$	12,160
Selling and administrative expenses:
Commissions	$	2,400
Fixed marketing expenses		140
Fixed administrative expenses		1,520			4,060
Net operating income				$	8,100
Less fixed interest expense					500
Income before income taxes				$	7,600
Less income taxes (30%)					2,280
Net income				$	5,320

After the profit plan was completed for the coming year, Colorado Telecoms sales agents demanded that the commissions be increased to 22 percent of the selling price. This demand was the latest in a series of actions that Liliana Richmond, the companys 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. Rosewoods 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 Telecoms 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 22 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 22 percent of the selling price or employs its own sales force.