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Sandhill Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 21% of
Sandhill Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 21% of sales. The income statement for the year ending December 31, 2025, is as follows. SANDHILL BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2025 Sales $74,800,000 Cost of goods sold Variable $29,920,000 Fixed 8,590,000 38,510,000 Gross profit $36,290,000 Selling and marketing expenses Commissions Fixed costs Operating income $15,708,000 10,890,500 26,598,500 $9,691,500 The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 10% and incur additional fixed costs of $8,228,000. Calculate the degree of operating leverage at sales of $74,800,000 if (1) Sandhill Beauty uses sales agents, and (2) Sandhill Beauty employs its own sales staff. (Round answers to 2 decimal places, e.g. 1.25.) (1) Sandhill Beauty uses sales agents (2) Sandhill Beauty employs its own sales staff Degree of operating leverage
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