Colorado Telecom, lnc, 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 202 follows: After the profit plan was completed for the coming year, Colorado Telecom's sales agents demanded that the commissions be increased to 221/ percent of the selling price. This demand was the latest in a series of actions that Liliana Richmond, the company's president, bellieved had gone too far. She asked Molly Rosewood, the most sales-oriented officer in her productionoriented 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. After the profit plan was completed for the coming year, Colorado Telecom's sales agents demanded that the commissions be increased to 221/2 percent of the selling price. This demand was the latest in a series of actions that Lliana Richmond, the company's president, believed had gone too far. She asked Molly Rosewood, the most sales-oriented officer in her productionoriented 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 recelve a commission of 10 percent of the selling price in addition to their salary. Required: 1. Calculate Colorado Telecom's estimated break-even point in sales dollars for 202. 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 221/2 percent of the selling price. determine the estimated volume in sales dollars for 202 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 202 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 (For all requirements, do not round intermediate calculations and enter your answers in whole dollars, not in thousands of dollars.) Required: 1. Calculate Colorado Telecom's estimated break-even point in sales dollars for 202. 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 221/2 percent of the selling price, determine the estimated volume in sales dollars for 202 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 202 regardiess of whether the company continues to sell through agents and pays a commission of 221/2 percent of the selling price or employs its own sales force. (For all requirements, do not round intermediate calculations and enter your answers in whole dollars, not in thousands of dollars.)
