Lionel Corporation manufactures pharmaceutical products sold through o network of sales sgents in the United States and Consda.

The sgents are currently paid on $18\%$ commission on sales; that percentsge was used when Lionel prepored the following budgeted

income statement for the fiscal year ending June $30,2022.$

Since the completion of the income statement, Lionel hos lesmed that its soles sgents are requiring o $5\%$ incresse in their commission

rate $($to $23\%)$ for the upcoming year. As a result, Lionel's president has decided to investigste the possibility of hiring its own sales staff

in place of the network of sales agents ond has ssked Alon Chen, Lionel's controller, to gother information on the costs associated with

this change.

Alsn estimates that Lionel must hire eight salespeople to cover the current market area, at an aversge annual payroll cost for each

employee of $$80,000,$ including fringe benefits expense. Travel and entertainment expenses are expected to total $$780,000$ for the

yesr, and the annusl cost of hiring s sales mansger and soles secretary will be $$240,000.$ In addition to their solaries, the eight

salespeople will each earn commissions at the rate of $10\%$ of sales. The president believes that Lionel also should incresse its

odvertising budget by $$680,000$ if the eight solespeople ore hired.

Required:

Determine Lionel's breakeven point $($operating profit $=0)$ in sales dollors for the fiscal year ending June $30,2022,$ if the company

hires its own solesforce and incresses its sovertising costs. Prove this by constructing o contribution income statement.

If Lionel continues to sell through its network of soles agents and poys the higher commission rate, determine the estimsted volume

in sales dollars that would be required to generate the operating profit as projected in the budgeted income statement.

Complete this question by entering your answers in the tabs below.

Required $1$

Determine Lionel's breakeven point $($operating profit $=0)$ in sales dollars for the fiscal year ending June $30,2022,$ if the

company hires its own salesforce and increases its advertising costs. Prove this by constructing a contribution income

statement. $($Do not round intermediate calculations. Enter your answers in thousands of dollars.$)$