Morocco Corporation manufactures disposable thermometers that are sold to hospitals through a network of independent sales agents located in the United States and Canada. These agents sell a variety of products to hospitals in addition to Morocco's disposable thermometer. The sales agents are currently paid an 18% commission on sales, and this commission rate was used when Morocco's management prepared the following budgeted income statement for the coming year.

Morocco Corporation

Budgeted Income Statement

Sales..................................... $30,000,000

Cost of Goods Sold:

Variable......................... $17,800,000

Fixed............................ 2,400,000 20,200,000

Gross Margin........................... 9,800,000

Selling and Admin. Expenses:

Commissions................... 5,400,000

Fixed Advertising Exp....... 800,000

Fixed Admin. Exp............ 3,200,000 9,400,000

Net Operating Income................. $ 400,000

Since completion of the above statement, Morocco's management has learned that the independent sales agents are demanding an increase in the commission rate to 20% of sales for the upcoming year. This would be the third increase in commissions demanded by the independent sales agents in five years. As a result, Morocco's management has decided to investigate the possibility of hiring its own sales staff to replace the independent sales agents.

Morocco's controller estimates that the company will have to hire eight salespeople to cover the current market area, and the total annual payroll cost of these employees will be about $700,000, including fringe benefits. The salespeople will also be paid commissions of 10% of sales. Travel and entertainment expenses are expected to total about $300,000 for the year. The company will also have to hire a sales manager and support staff whose salaries and fringe benefits will come to about $200,000 per year. To make up for the promotions that the independent sales agents had been running on behalf of Morocco, management believes that the company's budget for fixed advertising expenses should be increased by $500,000.

My question is

Determine the volume of sales at which net operating income would be equal regardless of whether Morocco corporation sells through agents (at a 20% commission rate) or employs its own sales force?