Problem 6-6A (Part Level Submission)

Bonita 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 income statement for the year ending December 31, 2017, is as follows.

BONITA BEAUTY CORPORATION

Income Statement

For the Year Ended December 31, 2017

Sales$77,400,000Cost of goods sold Variable$37,152,000 Fixed8,660,00045,812,000 Gross margin$31,588,000Selling and marketing expenses Commissions$13,932,000 Fixed costs10,800,00024,732,000 Operating income$6,856,000

The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 8% and incur additional fixed costs of $7,740,000.

(a)

Your answer is correct.Under the current policy of using a network of sales agents, calculate the Bonita Beauty Corporation's break-even point in sales dollars for the year 2017. (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answers to 0 decimal places, e.g. 2,510.)

Break-even point$

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(b)

Calculate the company's break-even point in sales dollars for the year 2017 if it hires its own sales force to replace the network of agents. (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answers to 0 decimal places, e.g. 2,510.)

Break-even point$