Comtech Corporations is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a sales commission of 15% for all items sold. Belinda Carter, Comtech's controller, has just prepared the company's budgeted incom- statement for next year as follows: Comtech Corporations Budgeted Income Statement For the Year Ended December 31 Sales $16,000,000 Manufacturing expenses: Variable $?,200,000 Fixed overhead 2,340,000 3,540,000 Gross margin 5,450,000 Selling and administrative expenses: Commissions to agents 2,400,000 Fixed marketing expenses 120000" Fixed administrative expenses 1,300,000 4,320,000 Net operating income 2,140,000 Fixed interest expenses 540,000 Income before income taxes 1,500,000 Income taxes {30%} 430,000 Net income 3 1,120,000 *anarily depreciation on storage facilities. As Belinda handed the statement to Karl vecci, Pittman's president, she commented, \"I went ahead and used the agents' 15% commission rate in completing these statements, but we've just learned that they refuse to handle our products next year unless we increase the commission rate to 20%.\" \"That's the last straw,\" Karl replied angn'ly. \"Those agents have been demanding more and more, and this time they've gone too far. How can they possibly defend a 20% commission rate?" \"They claim that aer paying for advertising, travel, and the other costs of promotion, there's nothing left over for prot," replied Belinda. \"I say it's just plain robbery," retorted Kart. \"And I also say it's time we dumped those guys and got our own sales force. Can you get your people to work up some cost gures for us to look at?" \"We've already worked them up,\" said Belinda. \"Several companies we know about pay a 15% commission to their own salespeople, along with a small salary. Cit course, we would have to handle all promotion costs, too. We gure our xed expenses would increase by $2,400,000 per year, but that would he more than offset by the $3,200,000 (20% x $15,000,000} that we would avoid on agents' commissions.\" The breakdown of the $2,400,000 cost follows: Salaries: Sales manager $100,000 Salespersons 000,000 Travel and entertainment 400,000 Advertising 1 000,000 Total $2,400,000 \"Super," replied Karl. \"And I noticed that the $2,400,000 equals what we're paying the agents under the old 15% commission rate.\" \"It's even betterthah that,\" explained Belinda. \"We can actually save $T5,000 a year because that's what we're paying our auditors to check out the agents' reports. So our overall administrative expenses would be less.\" \"F'ull all of these numbers together and we'll show them to the executive committee tomorrow," said Karl. "With the approval of the committee, we can move on the matter immediately." Required: a. Calculate lComtech's breakeven point in dollar sales for next year assuming: 1. The agents' commission rate remains unchanged at 15%. 2. The agents' commission rate is increased to 20%. 3. The company employs its own sales force. _ Assume that lComtech decides to continue selling through agents and pays the 20% commission rate. Determine the dollar sales that would he required to generate the same net income as contained in the budgeted income statement for next year. _ Determine the dollar sales at which net income would be equal regardless of whether Comtech sells through agents {at a Edit: commission rate} or employs its own sales force. _ Calculate the degree of operating Ieyerage that the company would expect to have at the end of next year assuming: 1. The agents' commission rate remains unchanged at 15%. 2. The agents' commission rate is increased to Ends. 3. The company employs its own sales force. . Use income before income taxes in your operating leyerage calculation. Based on the data in {1 } through [4] above, matte a recommendation as to whether the company should continue to use sales agents {at a QUE-t1 commission rate) or employ its own sales force. Give many reasons for your