Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Oriole Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 20% of sales.

image text in transcribedimage text in transcribed

image text in transcribedimage text in transcribedimage text in transcribed

Oriole Beauty Corporation manufactures cosmetic 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 31,2025 , is as follows. The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 8% and incur additional fixed costs of $8,472,000. (a) Your answer is correct. Under the current policy of using a network of sales agents, calculate the Oriole Beauty Corporation's break-even point in sales dollars for the year 2025. Break-even point $ (b) Your answer is correct. Calculate the company's break-even point in sales dollars for the year 2025 if it hires its own sales force to replace the network of agents. Your answer is correct. Calculate the degree of operating leverage at sales of $70,600,000 if (1) Oriole Beauty uses sales agents, and (2) Oriole Beauty employs its own sales staff. (Round answers to 2 decimal places, e.g. 1.25.) Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending December 31,2025 , regardless of whether Oriole Beauty Corporation employs its own sales staff and pays them an 8% commission or continues to use the independent network of agents. (Hint: Set up an equation, with the net income formula employing independent agents as one side of the equation and the net income formula employing the company's own sales staff as the other side of the equation. Before solving, eliminate those aspects that are the same on each side of the equation as they do not vary under the two alternatives.) Estimated sales volume $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting For Managerial Planning Decision Making And Control

Authors: Andrew Schiff, Hsihui Chang, Woody M Liao, James L Boockholdt

5th Edition

0759340412, 978-0759340411

More Books

Students also viewed these Accounting questions

Question

a. What aspects of the situation are under your control?

Answered: 1 week ago