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

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(b)

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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

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(c1)

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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

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(d)

Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending December 31, 2022, regardless of whether Ivanhoe Beauty Corporation employs its own sales staff and pays them an 10% commission or continues to use the independent network of agents.

Estimated sales volume

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