Pharoah Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The...
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Pharoah Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 22% of sales. The income statement for the year ending December 31, 2025, is as follows. PHAROAH BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2025 Sales Cost of goods sold Variable Fixed Gross profit Selling and marketing expenses Commissions Fixed costs Operating income $30,760,000 8,580,000 $16,918,000 10,070,400 $76,900,000 39,340,000 $37,560,000 26,988,400 $10,571,600 The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 10% and incur additional fixed costs of $9,228,000. Calculate the degree of operating leverage at sales of $76,900,000 if (1) Pharoah Beauty uses sales agents, and (2) Pharoah Beauty employs its own sales staff. (Round answers to 2 decimal places, e.g. 1.25.) (1) Pharoah Beauty uses sales agents (2) Pharoah Beauty employs its own sales staff Degree of operating leverage Pharoah Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 22% of sales. The income statement for the year ending December 31, 2025, is as follows. PHAROAH BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2025 Sales Cost of goods sold Variable Fixed Gross profit Selling and marketing expenses Commissions Fixed costs Operating income $30,760,000 8,580,000 $16,918,000 10,070,400 $76,900,000 39,340,000 $37,560,000 26,988,400 $10,571,600 The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 10% and incur additional fixed costs of $9,228,000. Calculate the degree of operating leverage at sales of $76,900,000 if (1) Pharoah Beauty uses sales agents, and (2) Pharoah Beauty employs its own sales staff. (Round answers to 2 decimal places, e.g. 1.25.) (1) Pharoah Beauty uses sales agents (2) Pharoah Beauty employs its own sales staff Degree of operating leverage
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Related Book For
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118856994
4th Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly
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