Question

Olin Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The forecast income statement for the year ending December 31, 2020, is as follows:

OLIN BEAUTY CORPORATION Income Statement Year Ending December 31, 2020
Sales					$78,335,000
Cost of goods sold
	Variable		$36,034,100
	Fixed		7,880,000		43,914,100
	Gross margin				34,420,900
Selling and marketing expenses
	Commissions		$14,100,300
	Fixed costs		10,084,000		24,184,300
	Operating income				$10,236,600

The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 9% and incur fixed costs of $7,050,150.

Under the current policy of using a network of sales agents, calculate Olin Beauty Corporation’s break-even point in sales dollars for the year 2020.

Break-even point:

$

Calculate the company's break-even point in sales dollars for the year 2020 if it hires its own sales force to replace the network of agents. (Round answer to the nearest whole dollar, e.g. 5,275.)

Break-even point:

$

Answer 1