PEAR AND CREASE CORPORATION Forecast Income Statement For the Year Ending December 31, 2020 Sales $120,000,000 Cost of goods sold Variable $58,500,000 Fixed 11,000.000 69.500,000 Gross margin 50,500,000 Selling and marketing expenses Commissions 19,500,000 Fixed costs 10,000,000 29,500,000 Operating income $21.000.000 The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 10% and incur additional fixed costs of $12.0 million. The additional fixed costs will be used to expand the sales floor area. This is option B. Required: (17 marks) (a) Under the current policy of using a network of sales agents (option A), calculate P&C's break-even point in sales dollars for the year 2020. (2 marks) (b) Calculate P&C's break-even point in sales dollars for the year 2020 if it hires its own sales force (option B) to replace the network of agents. Based on the difference in break-even points between options A and B, provide an analysis about the retention (option A) or replacement (option B) of the network of agents. Explain which one is preferable? (4 marks) (c) Calculate the target sales values in dollars that would generate an identical net income for the year ending December 31, 2020, regardless of whether P&C employs its own sales staff and pays them a 10% commission as well as incurring additional fixed costs of $12.0 million (option B), or continues to use the independent network of agents (option A). In not more than 50 words, explain how you arrive at the answer with a word count. (7 marks) (d) In not more than 100 words, provide a recommendation to P&C about retention (option A) or replacement (option B) of the network of agents if the sales level in the year 2020 is forecast to be higher than the target sales value [what you calculated in (c) above]. You have to address the issue of contribution margin in your recommendation and include a word count in your answer. (4 marks)