Klyne Corporation manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2020, is as follows: Sales Cost of goods sold i Variable. KLYNE CORPORATION Income Statement For the Year Ending December 31, 2020 Fixed Gross margin Selling and marketing expenses Commissions Fixed costs Operating income Break-even point $14,850,000 3,009,580 5,940,000 3,700,000 Break-even point $ 33,000,000 17,859,580 15,140,420 Klyne is considering hiring its own sales staff to replace the network of agents. Klyne will pay its salespeople a commission of 10% and incur fixed costs of $2,080,000. 9,640,000 $ 5,500,420 Required: 1. Calculate Klyne Corporation's break-even point in sales dollars for the year 2020. (Round your answer to 2 decimal places.) 2. Calculate Klyne Corporation's break-even point in sales dollars for the year 2020 if the company had hired its own sales force to replace the network of agents. (Round your answer to 2 decimal places.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Klyne Corporation manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a
commission of 18% of sales. The income statement for the year ending December 31, 2020, is as follows:
Sales
Cost of goods sold i
Variable.
KLYNE CORPORATION
Income Statement
For the Year Ending December 31, 2020
Fixed
Gross margin
Selling and marketing expenses
Commissions
Fixed costs
Operating income
Break-even point
$14,850,000
3,009,580
5,940,000
3,700,000
Break even point
$ 33,000,000
17,859,580
15,140,420
Klyne is considering hiring its own sales staff to replace the network of agents. Klyne will pay its salespeople a commission of 10% and
incur fixed costs of $2,080,000.
9,640,000
$ 5,500,420
Required:
1. Calculate Klyne Corporation's break-even point in sales dollars for the year 2020. (Round your answer to 2 decimal places.)
2. Calculate Klyne Corporation's break-even point in sales dollars for the year 2020 if the company had hired its own sales force to
replace the network of agents. (Round your answer to 2 decimal places.)
Transcribed Image Text:Klyne Corporation manufactures pharmaceutical products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2020, is as follows: Sales Cost of goods sold i Variable. KLYNE CORPORATION Income Statement For the Year Ending December 31, 2020 Fixed Gross margin Selling and marketing expenses Commissions Fixed costs Operating income Break-even point $14,850,000 3,009,580 5,940,000 3,700,000 Break even point $ 33,000,000 17,859,580 15,140,420 Klyne is considering hiring its own sales staff to replace the network of agents. Klyne will pay its salespeople a commission of 10% and incur fixed costs of $2,080,000. 9,640,000 $ 5,500,420 Required: 1. Calculate Klyne Corporation's break-even point in sales dollars for the year 2020. (Round your answer to 2 decimal places.) 2. Calculate Klyne Corporation's break-even point in sales dollars for the year 2020 if the company had hired its own sales force to replace the network of agents. (Round your answer to 2 decimal places.)
3. Calculate the degree of operating leverage at sales of $33,000,000, considering (a) Klyne uses sales agents and (b) Klyne employs
its own staff. Describe the advantages and disadvantages of each alternative. (Round your answers to 2 decimal places.)
Using sales agent
Employing own sales staff
Degree of Operating
Leverage
2.45
Transcribed Image Text:3. Calculate the degree of operating leverage at sales of $33,000,000, considering (a) Klyne uses sales agents and (b) Klyne employs its own staff. Describe the advantages and disadvantages of each alternative. (Round your answers to 2 decimal places.) Using sales agent Employing own sales staff Degree of Operating Leverage 2.45
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