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Problem 6.49A a-b, c1, d Olin Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a
Problem 6.49A a-b, c1, d Olin Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The forecast income statement for the year ending December 31, 2020, is as follows: OLIN BEAUTY CORPORATION Income Statement Year Ending December 31, 2020 Sales $78,530,000 Cost of goods sold Variable $35,338,500 Fixed 7,810,000 43,148,500 Gross margin 35,381,500 Selling and marketing expenses Commissions $14,135,400 Fixed costs 10,209,000 24,344,400 Operating income $11,037,100 The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 11% and incur fixed costs of $5,497,100. Under the current policy of using a network of sales agents, calculate Olin Beauty Corporation's break-even point in sales dollars for the year 2020. Calculate the company's break-even point in sales dollars for the year 2020 if it hires its own sales force to replace the network of agents. (Round answer to the nearest whole dollar, e.g. 5,275.) Break-even point: $ SHOW SOLUTIONSHOW ANSWER LINK TO TEXT LINK TO TEXTLINK TO TEXT Calculate the degree of operating leverage at sales of $78,530,000 if : (1) Olin Beauty uses sales agents. (Round answer to 2 decimal places, e.g. 15.25.) Operating leverage Olin Beauty employs its own sales staff. (Round answer to 2 decimal places, e.g. (2) 15.25.) Operating leverage Calculate the estimated sales volume in dollars that would generate an identical operating income for the year ending December 31, 2020, regardless of whether Olin Beauty Corporation employs its own sales staff and pays them a 11% commission or continues to use the independent network of agents. Point of indifference: t
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