EVERLASTING COMPANY manufacture replacement parts for cars and sells them to distributors in the Southwestern area of the country. The president of the company wishes to begin selling in the Northeastern area but is uncertain how to expand most profitably. Two alternatives have been selected for final consideration.

First is to use the services of independent sales representatives who would sell to distributors for a 15% commission. This plan would increase the clerical costs at the company's central office by $ 20,000 per year..

Second is to hire its own salespersons to work on a straight salary scheme, estimated to be $ 100,000 per year; additionally, an office would be opened in the region and would cost $ 25,000 per year to operate.

The variable cost on parts is at 35%. The president is uncertain about demand in the Northeastern area and asks that you analyze the profitability under both plans at various volumes. He selects $ 500,000, $ 700,000, $ 1,000,000 and $ 1,200,000 as the sales volumes to be used for comparison.

REQUIRED: Choose an alternative and defend your choice. Show Computations.