kindle inc. manufacures cosmetic products that are sold through a network of sales agents. the agents are paid a commision of 12.5% of sales. the income statement for the year ending december 31, 2013, is as follows;

kindle inc

income statement

year ending december 31, 2013

sales $130,000

cost of goods sold

variable $58,500

fixed $14,230 72,850

gross margin 57,150

selling and marketing expenses

commissions $16,250

fixed costs 17,100 33,350

operating income $23,800

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 $13,000 million

instructions

a. under the current policy of using a network of sales agents, calculate kindle, inc.'s break-even point in sales dollars for the year 2013

b. calculate the company's break-even point in sales dollars for the year 2013 if it hires its own sales force to repolace the network of agents

c. calculate the degree of operating leverage at sales of $130 million if (1) kindle, inc. uses sales agents, and (2) kindle, inc. employs its own sales staff