Swifty Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents....
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Accounting
Swifty Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 19% of sales. The income statement for the year ending December 31, 2020, is as follows.
SWIFTY BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2020
Sales
$ 71,600,000
Cost of goods sold
Variable
$ 28,640,000
Fixed
8,890,000
37,530,000
Gross margin
$ 34,070,000
Selling and marketing expenses
Commissions
$ 13,604,000
Fixed costs
10,289,800
23,893,800
Operating income
$ 10,176,200
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 $ 6,444,000.
(a)
Under the current policy of using a network of sales agents, calculate the Swifty Beauty Corporations break-even point in sales dollars for the year 2020.
Break-even point
$
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(b)
Calculate the companys break-even point in sales dollars for the year 2020 if it hires its own sales force to replace the network of agents.
Break-even point
$
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