The CEO of SB$,$ Andrew is confident that using the e$-$commerce platform will allow SB to

maintain its current level of profits since the cost of the system is less that the cost of sales in

$203.$ He has instructed the finance general manager to work out some analysis for the proposal

quickly, so he can present to the Board for approval next week.

Required:

$($a$)$ Apply cost$-$volume$-$profit analysis to compute the breakeven point $($in sales dollars$)$ for

the year $20$x$4$ under the following scenarios:

$($i$)$ Using sales staff only.

$($ii$)$ Using sales staff and the e$-$commerce platform.

$(8$ marks$)$

$($b$)$ If SB continues use the e$-$commerce platform in $204,$ compute the estimated sales

dollars $($rounded to nearest dollar$)$ that would be required to generate a net income

before tax of $60\%$ as with most players in the industry.

$(6$ marks$)$

$($c$)$ Compute the sales $($in nearest dollar$)$ for net income before taxes at which point SB will

be indifferent whether it join the e$-$commerce platform. Explain what your

computations tell you.

$(12$ marks$)$

$($d$)$ Compute the degree of operating leverage that SB would expect to have in $20$x$4$ the

following scenarios:

$($i$)$ Using sales staff only.

$($ii$)$ Using sales staff and the e$-$commerce platform.

Use operating income before taxes in the above computation. Round your answers to $2$

decimal places.