Fabacan Corp., is a small but growing manufacturer of telecommunications equipment. The company relies completely on independent sales agents to market its products. These agents are paid a sales commission of 20% of sales. All the following data are in thousands of dollars. The companys budgeted income statement appears below:

The company is considering the possibility of employing its own salespersons. Eight individuals would be required, at the total fixed salary of $600 for these employees, plus commissions of 7.5% of sales. In addition, a sales manager would be employed at a fixed salary of $100. The total fixed travel and advertising expenses are expected to be $1,625.

Required: a) Compute the break-even point in sales dollars based upon the company's budgeted income statement, assuming that the company continues to use independent sales agents.

b) Compute the break-even point in sales dollars, assuming that the company employs its own salespersons.

$16,000 Budgeted Income Statement of Fabacan Corp. Sales Variable expenses: Cost of goods sold $7,200 Commissions 3,200 Contribution margin Fixed expenses Net income 10,400 $5,600 $4,800 $800