Whalley & Co manufacture medical wraps, which are sold through a leading medical supply company, MedCo. Whalley & Co pays MedCo a $22\%$ commission on sales.

You have been provided with Whalley & Co's statement of income for the year ending December $31,2021$:

Whalley & Co Statement of Income for the Year Ending December $31,2021$

MedCo Sales Agents

Sales

Variable

Fixed

Whalley & Co are considering bringing the sales function in$-$house and using their own sales agents. Under this arrangement, Whalley & Co would pay its agents $10\%$ commissions on sales and incur additional fixed costs of $$5,040,000.$

Questions:

Re$-$cast the $2021$ statement of income, assuming that Whalley & Co have decided to hire its own sales agents $(10$ points$)$

Using the re$-$cast statement, calculate:

a$.$ contribution margin percentage for each scenario $(2$ points$)$

b$.$ breakeven revenues for each scenario $(2$ points$)$

c$.$ degree of operating leverage under each of the two scenarios $(2$ points$)$

In $2022,$ Whalley & Co decide to use its own in$-$house sales team. They are not satisfied with the $10\%$ commission and have requested a $20\%$ commission. If all other cost$-$behaviour patterns remain the same $($i$.$e$.$ no change$),$ how much revenue must the in$-$house salespeople generate in order to earn the same operating income as $2021?(4$ points$)$