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Question 2 Sunland Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 20%
Question 2 Sunland Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 20% of sales. The income statement for the year ending December 31, 2020, is as follows. $76,400,000 SUNLAND BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2020 Sales Cost of goods sold Variable $32,852,000 Fixed 8,720,000 Gross margin Selling and marketing expenses Commissions $15,280,000 Fixed costs 10,360,900 Operating income 41,572,000 $34,828,000 25,640,900 $9,187,100 The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 7% and incur additional fixed costs of $9,932,000. Under the current policy of using a network of sales agents, calculate the Sunland Beauty Corporation's break-even point in sales dollars for the year 2020. Break-even point 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. Break-even points 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. Break-even points Calculate the degree of operating leverage at sales of $76,400,000 if (1) Sunland Beauty uses sales agents, and (2) Sunland Beauty employs its own sales staff. (Round answers to 2 decimal places, e.g. 1.25.) Degree of operating leverage (1) Sunland Beauty uses sales agents (2) Sunland Beauty employs its own sales staff Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending December 31, 2020, regardless of whether Sunland Beauty Corporation employs its own sales staff and pays them an 7% commission or continues to use the independent network of agents. Estimated sales volume Click if you would like to Show Work for this question: Open Show Work
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