Seco Corporation, a wholesale supply company, engages independent sales agents to market the company's lines. These agents

Question:

Seco Corporation, a wholesale supply company, engages independent sales agents to market the company's lines. These agents currently receive a commission of 20% of sales, but they are demanding an increase to 25% of sales made during the year ending December 31, 20A. The company had already prepared its 20A budget before learning of the agents' demand for an increase in commissions. The pro forma income statement below is based on this budget.

The company is considering the possibility of employing its own salespersons. Three individuals would be required, at an estimated annual salary of $30,000 each, plus commissions of 5% of sales. In addition, a sales manager would be employed at a fixed annual salary of $160,000. All other fixed costs, as well as the variable cost percentages, would remain the same as the estimates in the 20A pro forma income statement.
Required:
(1) Compute the company's estimated break-even point in sales dollars for the year ending December 31, 20A, based on the pro forma income statement prepared by the company.
(2) Compute the company's estimated break-even point in sales dollars for the year ending December 31, 20A, if the company employs its own salespersons.
(3) For the year ending December 31, 20A, compute in sales dollars the estimated volume required to yield the same net income as projected in the pro forma income statement, if the company continues to use the independent sales agents and agrees to their demand for a 25% sales commission.
(4) For the year ending December 31, 20A, compute the estimated volume in sales dollars that will generate net income that is identical whether the company employs its own salespersons or continues to use the independent sales agents and pays them a 25% commission.