Company X manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission at a percent of sales basis. Partial income statement for the year ending Dec 31, 2017, is as follows: Item Amount (TL) Sales 79,000,000 COGS Variable 31,540,000 Fixed 8,610,000 Selling and marketing expenses Commissions 13,530,000 10,210,000 Fixed costs The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 8.10% and incur additional fixed costs of TL7,530,000. Q-1) Calculate the degree of operating leverage at sales TL79,000,000 if the company uses sales agents. Q-2) Assume the company employs its own sales staff. Calculate the change in net income in TL if sales decrease by 10%. Q-3) Calculate the estimated sales volume in sales TL that would generate an identical net income for the year ending December 31, 2017, regardless of whether the company uses sales agents or employs its own sales staff.

Company X manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission at a percent of sales basis. Partial income statement for the year ending Dec 31, 2017, is as follows: Item Amount (TL) Sales 79,000,000 COGS Variable 31,540,000 Fixed 8,610,000 Selling and marketing expenses Commissions 13,530,000 10,210,000 Fixed costs The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 8.10% and incur additional fixed costs of TL7,530,000. Q-1) Calculate the degree of operating leverage at sales TL79,000,000 if the company uses sales agents. Q-2) Assume the company employs its own sales staff. Calculate the change in net income in TL if sales decrease by 10%. Q-3) Calculate the estimated sales volume in sales TL that would generate an identical net income for the year ending December 31, 2017, regardless of whether the company uses sales agents or employs its own sales staff.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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