Question
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)
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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 |
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(b)
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 |
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