Bonita Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 20% of sales. The income statement for the year ending December 31, 2020, is as follows.
BONITA BEAUTY CORPORATION
Income Statement For the Year Ended December 31, 2020
Sales $79,500,000
Cost of goods sold
Variable $33,390,000
Fixed 8,670,000 42,060,000
Gross margin $37,440,000
Selling and marketing expenses
Commissions $15,900,000
Fixed costs 10,159,000 26,059,000
Operating income $11,381,000
The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 8% and incur additional fixed costs of $9,540,000.
Under the current policy of using a network of sales agents, calculate the Bonita Beauty Corporation's break-even point in sales dollars for the year 2020.
Answers: 2
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