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Pharoah Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 2 2 %
Pharoah Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of of sales. The income statement for the year ending December is as follows. PHAROAH BEAUTY CORPORATION Income Statement For the Year Ended December Sales $ Cost of goods sold Variable $ Fixed Gross profit $ Selling and marketing expenses Commissions $ Fixed costs Operating income $ The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of and incur additional fixed costs of $ Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending December regardless of whether Pharoah Beauty Corporation employs its own sales staff and pays them an 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 companys 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.
Pharoah Beauty Corporation manufactures cosmetic products that are sold through a network of
sales agents. The agents are paid a commission of of sales. The income statement for the year
ending December is as follows.
PHAROAH BEAUTY CORPORATION
Income Statement
For the Year Ended December
Sales $
Cost of goods sold
Variable $
Fixed
Gross profit $
Selling and marketing expenses
Commissions $
Fixed costs
Operating income $
The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of and incur additional fixed costs of $
Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending December regardless of whether Pharoah Beauty Corporation employs its own sales staff and pays them an 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 companys 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.
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