Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of

its own; rather, it relies on independent sales agents to market its products. These agents are paid a sales commission of $15\%$

for all items sold.

Barbara Cheney, Pittman's controller, just prepared the company's budgeted income statement for next year as follows:

$*$Primarily depreciation on storage facilities.

As Barbara handed the statement to Karl Vecci, Pittman's president, she commented, "I went ahead and used the agents' $15\%$

commission rate in completing these statements, but we've just learned they refuse to handle our products next year unless

we increase the commission rate to $20\%."$

"It's even better than that," explained Barbara. $"$We can actually save $$87,400$ a year because that's what we're paying our

auditors to check out the agents' reports. So our overall administrative expenses would be less."

"Pull all of these numbers together and we'll show them to the executive committee tomorrow," said Karl. "With the approva

the committee, we can move on the matter immediately."

Required: $$

$1$ Compute Pittman Company's breakeven point in dollar sales for next year assuming:

a$.$ The agents' commission rate remains unchanged at $15\%.$

b$.$ The agents' commission rate is increased to $20\%.$

c$.$ The company employs its own sales force.

Assume Pittman Company decides to continue selling through agents and pays the $20\%$ commission rate. Calculate the

dollar sales required to generate the same net income as contained in the budgeted income statement for next year.

Calculate the dollar sales at which net income would be equal regardless of whether Pittman Company sells through agent

$($at a $20\%$ commission rate$)$ or employs its own sales force.

Compute the degree of operating leverage the company would expect to have at the end of next year assuming:

a$.$ The agents' commission rate remains unchanged at $15\%.$

b$.$ The agents' commission rate is increased to $20\%.$

c$.$ The company employs its own sales force.