Klyne Corporation manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a commission of 20% 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, 2020Sales$33,000,000Cost of goods soldVariable$19,470,000Fixed2,633,00022,103,000Gross margin10,897,000Selling and marketing expensesCommissions6,600,000Fixed costs1,970,0008,570,000Operating income$2,327,000

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 $2,094,000.

Required:

1.Calculate Klyne Corporation's break-even point in sales dollars for the year 2020.(Round your answer to 2 decimal places.)

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.)

3.Calculate the degree of operating leverage at sales of $33,000,000, 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.)