Question: WHY IS IT IMPORTANT TO FIND The break-even point in sales dollar, Sales required to generate target profit, Sales volume required, AND Degree of Operating Leverage on the scenario below? Please explain briefly. Do not find the answers just explain why is it important to find them.

Pitman Company is small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a commission of 15% selling price for all items sold. As Barbara handed the statement to Karl Vecci, Pitman's president, she commented, "I want ahead and used the agents' 15% commission rate in completing these statements, but we've just learned that they refuse to handle our products next year unless we increase the commission rate to 20%".

"that the last straw", Karl replied angrily. "Those agents have been demanding more and more, and this time they've gone too far. How can they possibly defend a 20% commission rate?"

"they claim that after paying for advertising, travel, and the other costs of promotion, there's nothing left over for profit," replied Barbara.

"I say it's just plain robbery", reported Karl. "And I also it's time we dumped those guys and got our own sales force. Can you get your people to work up some cost figures for us to look at?"

"We've already worked them up," said Barbara. "Several companies we know about pay a 7.5% commission to their own salespeople, along with a small salary. Of course, we could have to handle would be more than offset by the $3,200,000 (20% x $1,600,000) that we would avoid on agents commission." "Super", replied Karl. "And I noticed that the $2,400,000 is just what we're paying the agents under the old 15% commission rate."

"It's even better than that," explained Barbara. "We can actually save $75,000 a year because that's what we have to pay the auditing firm now to check out the agents reports. So our overall administrative costs would be less."

"Put all of these numbers together and we'll show them to the executive committee tomorrow," said Karl. "With the approval of the committee, we can move on the matter immediately."