Olin Beauty Corporation manufactures cosmetic products that aresold through a network of sales agents. The agents are paid acommission of 18% of sales. The forecast income statement for theyear 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 replacethe network of agents. It will pay its salespeople a commission of9% 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 salesdollars for the year 2020.
Calculate the company's break-even point in sales dollars forthe year 2020 if it hires its own sales force to replace thenetwork of agents. (Round answer to the nearest wholedollar, e.g. 5,275.)
