Bonita 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 income statements for the year ending December, 31, 2014, is as follows   Sales                                                                               $75,000,000 Cost of Goods Sold   Variable                                         $31,500,000   Fixed                                                 8,610,000                40,110,000 Gross Margin                                                                      34,890,000 Selling and marketing expenses   Commission                                    13,500,000   Fixed Costs                                      10,260,000                23,760,000 Operating Income                                                              11,130,000   The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission 8% and incur additional fixed costs of $7.5 million.   Question: Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending Desember 31, 2014, regardless of whether Bonita Beauty Corporation employs its own sales staff and pays them an 8% commission or continues to use the independent network of agents   Thanks in advance

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Bonita 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 income statements for the year ending December, 31, 2014, is as follows

 

Sales                                                                               $75,000,000

Cost of Goods Sold

  Variable                                         $31,500,000

  Fixed                                                 8,610,000                40,110,000

Gross Margin                                                                      34,890,000

Selling and marketing expenses

  Commission                                    13,500,000

  Fixed Costs                                      10,260,000                23,760,000

Operating Income                                                              11,130,000

 

The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission 8% and incur additional fixed costs of $7.5 million.

 

Question: Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending Desember 31, 2014, regardless of whether Bonita Beauty Corporation employs its own sales staff and pays them an 8% commission or continues to use the independent network of agents

 

Thanks in advance

 

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