Klyne Corporation manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a commission of 12% of sales. The income statement for the year ending December 31, 2020, is as follows:

Klyne is considering hiring its own sales staff to replace the network of agents. Klyne will pay its salespeople a commission of 12% and incur fixed costs of $2,098,000.

Required -

2. Calculate Klyne Corporations break-even point in sales dollars for the year 2020 if the company had hired its own sales force to replace the network of agents. (Round your answer to 2 decimal places.)

3. Calculate the degree of operating leverage at sales of $35,000,000, considering (a) Klyne uses sales agents and (b) Klyne employs its own staff. Describe the advantages and disadvantages of each alternative. (Round your answers to 2 decimal places.)

4. If Klyne increases the commission paid to its sales staff to 10%, keeping all other costs the same, how much revenue (in dollars) would Klyne have to generate to earn the same operating income it did in 2020? (Round your answer to 2 decimal places.)

$ 35,000,000 KLYNE CORPORATION Income Statement For the Year Ending December 31, 2020 Sales Cost of goods sold Variable $22,050,000 Fixed 2,635,000 Gross margin Selling and marketing expenses Commissions 4,200,000 Fixed costs 1,870,000 Operating income 24,685,000 10, 315,000 6,070,000 $ 4,245,000 3. Calculate the degree of operating leverage at sales of $35,000,000, considering (a) Klyne uses sales agents and (b) Klyne employs its own staff. Describe the advantages and disadvantages of each alternative. (Round your answers to 2 decimal places.) Degree of Operating Leverage Using sales agent Employing own sales staff