Morocco Corporation manufactures disposable thermometers that are sold to hospitals through a

network of independent sales agents located in the United States and Canada. These agents sell a

variety of products to hospitals in addition to Morocco$$s disposable thermometer. The sales agents

are currently paid an $18\%$ commission on sales, and this commission rate was used when

Morocco$$s management prepared the following budgeted income statement for the coming year.

Morocco Corporation

Budgeted Income Statement

Since completion of the above statement, Morocco$$s management has learned that the independent

sales agents are demanding an increase in the commission rate to $20\%$ of sales for the upcoming

year. This would be the third increase in commissions demanded by the independent sales agents in

five years. As a result, Morocco$$s management has decided to investigate the possibility of hiring

its own sales staff to replace the independent sales agents.

Morocco$$s controller estimates that the company will have to hire eight salespeople to cover the

current market area, and the total annual payroll cost of these employees will be about $$700,000,$

including fringe benefits. The salespeople will also be paid commissions of $10\%$ of sales. Travel

and entertainment expenses are expected to total about $$600,000$ for the year. The company will

also have to hire a sales manager and support staff whose salaries and fringe benefits will come to

about $$200,000$ per year. To make up for the promotions that the independent sales agents had been

running on behalf of Morocco, management believes that the company$$s budget for fixed

advertising expenses should be increased by $$500,000.$

$2.(2$ points$)$ Calculate Morocco$$s break$-$even point in sales dollars next year for each of these

alternatives:

a$.$ The independent sales agents$$ commission rate stays the same at $18\%.$

b$.$ The independent sales agents$$ commission rate increases to $20\%.$

c$.$ The company employs its own sales force.

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