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Klyne Corporation manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a commission of 19% of sales.
Klyne Corporation manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a commission of 19% of sales. The income statement for the year ending December 31, 2020, is as follows: KLYNE CORPORATION Income Statement For the Year Ending December 31, 2020 Sales $ 26,500,000 Cost of goods sold Variable Fixed $12,190,000 2,871,000 15,061,000 11,439,000 7:27 Gross margin Selling and marketing expenses Commissions Fixed costs Operating income 5,035,000 3,395,000 $ 8,430,000 3,009,000 Klyne is considering hiring its own sales staff to replace the network of agents. Klyne will pay its salespeople a commission of 15% and incur fixed costs of $2,081,000. Required: 1. Calculate Klyne Corporation's break-even point in sales dollars for the year 2020. (Round your answer to 2 decimal places.) Break-even point 2. Calculate Klyne Corporation's break-even point in sales dollars for the year 2020 if the company had hired its own sales force to replace the noty of agents (Round you so 2 decimal places Help 2. Calculate Klyne Corporation's 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.) Eneat-ever point. 3. Calculate the degree of operating leverage at sales of $26,500,000, 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 4. If Klyne increases the commission paid to its sales staff to 12%, 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.) Revenue (n dollars)
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