Hittman company is a small but growing manutacturer of telecommunications equipment. I he company has no sales torce of its own;

rather, it relies completely on independent sales agents to market its products. These agents are psid a sales commission of $15\%$ for all

items sold.

Barbara Cheney, Pittman's controller, has just prepared the company's budgeted income statement for next year as follows:

$*$Primarily depreciation on storage facilities.

As Barbara handed the statement to Karl Vecci, Pittman's president, she commented, "I went ahead and used the agents' $15\%$

commission rate in completing these stotements, but we've just learned that they refuse to handle our products next year unless we

increase the commission rote to $20\%."$

"That's the last strow," Karl replied angrily. "Those agents have been demanding more and more, and this time they've gone too for.

How can they possibly defend a $20\%$ commission rate?"

"They claim that after poying for acvertising, trovel, and the other costs of promotion, there's nothing left over for profit," replied

Barbsra.

"I soy it's just plain robbery." retorted Karl. "And I also soy it's time we dumped those guys and got our own soles force. Can you get

your people to work up some cost figures for us to look ot$?"$

"We've alresdy worked them up$,"$ said Barbora. "Several companies we know obout pay a $7\mathrm{.}5\%$ commission to their own salespeople,

along with a small salary. Of course, we would have to handle all promotion costs, too. We figure our fixed expenses would increase by

$$3,000,000$ per year, but that would be more than offset by the $$4,000,000(20\%$$$20,000,000)$ that we would avoid on agents"

commissions."

The breakdown of the $$3,000,000$ cost follows:

"Super," replied Korl. "And I noticed that the $$3,000,000$ equals what we're paying the agents under the old $15\%$ commission rate."

"It's even better than that," explained Barbara. $"$We can actually sove $$92,000$ o year becouse that's what we're paying our ouditors to

check out the agents' reports. So our overall administrative expenses would be less."

"Pull all of these numbers together and we'll show them to the executive committee tomorrow," said Korl. "With the approval of the

committee, we can move on the matter immediately."

Required:

Compute Pittman Compony's break$-$even point in dollor sales for next year assuming:

o$.$ The agents' commission rate remains unchanged at $15\%.$

b$.$ The agents' commission rate is increased to $20\%.$

c$.$ The compony employs its own soles force.