"Super," replied Karl. "And I noticed that the $$2,925,000$ equals what we're paying the agents under the old $15\%$ commission rate."

It's even better than that," explained Barbara. $"$We can actually save $$89,700$ a year because that's what we're paying our auditors t

check out the agents" reports. So our overall administrative expenses would be less."

"Pull 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."

Requlred:

Compute Pittman Company's break$-$even point in dollar sales for next year assuming:

a$.$ The agents' commission rate remains unchanged at $15\%.$

b$.$ The agents" commission rate is increased to $20\%.$

c$.$ The company employs its own sales force.

Assume that Pittman Company decides to continue selling through agents and pays t$"$It$\text{'}$s even better than that," explained Barbara. $"$We can actually save $$89,700$ a year because that's what we're paying our auditors to

check out the agents" reports. So our overall administrative expenses would be less."

"Pull 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."

Requlred:

Compute Pittman Company's break$-$even point in dollar sales for next year assuming:

a$.$ The agents' commission rate remains unchanged at $15\%.$

b$.$ The agents' commission rate is increased to $20\%.$

c$.$ The company employs its own sales force.

Assume that Pittman Company decides to continue selling through agents and pays the $20\%$ commission rate. Determine the dollar

sales that would be required to generate the same net income as contained in the budgeted income statement for next year.

Determine the dollar sales at which net income would be equal regardless of whether Pittman Company sells through agents $($at a

$20\%$ commission rate$)$ or employs its own sales force.

Compute the degree of operating leverage that the company would expect to have at the end of next year assuming:

a$.$ The agents' commission rate remains unchanged at $15\%.$

b$.$ The agents' commission rate is increased to $20\%.$

c$.$ The company employs its own sales force.

Use income before income taxes in your operating leverage computation.

Complete this question by entering your answers in the tabs below.

Compute the degree of operating leverage that the company would expect to have at the end of next year assuming: $($Use

income before income taxes in your operating leverage computation.$)$

Note: Round your answers to $2$ decimal places.