Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ivanhoe Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales.

Ivanhoe Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2022, is as follows.

IVANHOE BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2022

Sales

$ 79,300,000

Cost of goods sold

Variable

$ 31,720,000

Fixed

8,540,000 40,260,000

Gross profit

$ 39,040,000

Selling and marketing expenses

Commissions

$ 14,274,000

Fixed costs

10,750,600 25,024,600

Operating income

$ 14,015,400

The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 10% and incur additional fixed costs of $ 6,344,000.

(a)

Correct answer icon

Your answer is correct.

Under the current policy of using a network of sales agents, calculate the Ivanhoe Beauty Corporations break-even point in sales dollars for the year 2022.

Break-even point

$ enter the break-even point in dollars

eTextbook and Media

Attempts: 1 of 3 used

(b)

Correct answer icon

Your answer is correct.

Calculate the companys break-even point in sales dollars for the year 2022 if it hires its own sales force to replace the network of agents.

Break-even point

$ enter the break-even point in dollars

eTextbook and Media

Attempts: 1 of 3 used

(c1)

Calculate the degree of operating leverage at sales of $ 79,300,000 if (1) Ivanhoe Beauty uses sales agents, and (2) Ivanhoe Beauty employs its own sales staff. (Round answers to 2 decimal places, e.g. 1.25.)

Degree of operating leverage

(1)

Ivanhoe Beauty uses sales agents

enter a value rounded to 2 decimal places

(2)

Ivanhoe Beauty employs its own sales staff

enter a value rounded to 2 decimal places

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Accounting Volume 2

Authors: Frank Wood

4th Edition

0582413435, 978-0582413436

More Books

Students also viewed these Accounting questions