Morocco Corporation manufactures disposable thermometers that are sold to hospitals through anetwork of independent sales agents located in the United States and Canada. These agents sell avariety of products to hospitals in addition to Morocco$$s disposable thermometer. The sales agentsare currently paid an $18\%$ commission on sales, and this commission rate was used whenMorocco$$s management prepared the following budgeted income statement for the coming year.Morocco CorporationBudgeted Income StatementSales..................................... $$30,000,000$Cost of Goods Sold:Variable......................... $$17,900,000$Fixed............................ $2,300,00020,200,000$Gross Margin........................... $9,800,000$Selling and Admin. Expenses:Commissions................... $5,400,000$Fixed Advertising Exp....... $800,000$Fixed Admin. Exp............ $3,200,0009,400,000$Net Operating Income................. $ $400,000$Since completion of the above statement, Morocco$$s management has learned that the independentsales agents are demanding an increase in the commission rate to $20\%$ of sales for the upcomingyear. This would be the third increase in commissions demanded by the independent sales agents infive years. As a result, Morocco$$s management has decided to investigate the possibility of hiringits own sales staff to replace the independent sales agents.Morocco$$s controller estimates that the company will have to hire eight salespeople to cover thecurrent market area, and the total annual payroll cost of these employees will be about $$700,000,$including fringe benefits. The salespeople will also be paid commissions of $10\%$ of sales. Traveland entertainment expenses are expected to total about $$600,000$ for the year. The company willalso have to hire a sales manager and support staff whose salaries and fringe benefits will come toabout $$200,000$ per year. To make up for the promotions that the independent sales agents had beenrunning on behalf of Morocco, management believes that the company$$s budget for fixedadvertising expenses should be increased by $$500,000.$Required:$1.(4$ points$)$ Assuming sales of $$30,000,000,$ construct a budgeted contribution margin formatincome statement for the upcoming year with the following alternatives:a$.$ The independent sales agents$$ commission rate stays the same at $18\%.$b$.$ The independent sales agents$$ commission rate increases to $20\%.$c$.$ The company employs its own sales force$\mathrm{.}2.(2$ points$)$ Calculate Morocco$$s break$-$even point in sales dollars next year for each of thesealternatives:a$.$ The independent sales agents$$ commission rate stays the same at $18\%.$b$.$ The independent sales agents$$ commission rate increases to $20\%.$c$.$ The company employs its own sales force.$($continued on next page$)$

$3.(2$ points$)$ Refer to your answer in $(1)($b$)$ above. If the company employs its own salesforce, what volume of sales would be necessary to generate the same net operating incomethe company would generate in $(1)($b$)$ above?$4.(2$points$)$ Determine the volume of sales at which net operating income would be equalregardless of whether Morocco Corporation sells through agents $($at a $20\%$ commission rate$)$or employs its own sales force