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P6.6 (LO 1, 4), AN Bonita Beauty SA manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a

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P6.6 (LO 1, 4), AN Bonita Beauty SA manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2020, is as follows. 75,000,000 Bonita Beauty SA Income Statement For the Year Ended December 31, 2020 Sales Cost of goods sold Variable 31,500,000 Fixed 8,610,000 Gross margin Selling and marketing expenses Commissions 13,500,000 Fixed costs 10,260,000 Operating income 40,110,000 34.890,000 23,760,000 11,130,000 its The company is considering hiring its own sales staff to replace the network of agents. It will pay salespeople a commission of 8% and incur additional fixed costs of 7.5 million. Instructions a. Under the current policy of using a network of sales agents, calculate the Bonita Beauty SA's break-even point in sales for the year 2020. b. Calculate the company's break-even point in sales for the year 2020 if it hires its own sales force to replace the network of agents. c. Calculate the degree of operating leverage at sales of 75 million if (1) Bonita Beauty uses sales agents, and (2) Bonita Beauty employs its own sales staff. Describe the advantages and disadvan- tages of each alternative. d. Calculate the estimated sales volume that would generate an identical net income for the year ending December 31, 2020, regardless of whether Bonita Beauty employs its own sales staff and pays them an 8% commission or continues to use the independent network of agents

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