Cullumber Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The...
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Cullumber Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 19% of sales. The income statement for the year ending December 31, 2025, is as follows. CULLUMBER BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2025 Sales $74,800,000 Cost of goods sold Variable $29,920,000 Fixed 8,830,000 38,750,000 Gross profit $36,050,000 Selling and marketing expenses Commissions $14,212,000 Fixed costs 10,333,400 24,545,400 Operating income $11,504,600 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 $6,732,000. Calculate the degree of operating leverage at sales of $74,800,000 if (1) Cullumber Beauty uses sales agents, and (2) Cullumber Beauty employs its own sales staff. (Round answers to 2 decimal places, e.g. 1.25.) (d) (1) Cullumber Beauty uses sales agents (2) Cullumber Beauty employs its own sales staff eTextbook and Media Degree of operating leverage 2.67 3.25 Attempts: 1 of 2 used Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending December 31, 2025, regardless of whether Cullumber Beauty Corporation employs its own sales staff and pays them an 10% commission or continues to use the independent network of agents. (Hint: Set up an equation, with the net income formula employing independent agents as one side of the equation and the net income formula employing the company's own sales staff as the other side of the equation. Before solving, eliminate those aspects that are the same on each side of the equation as they do not vary under the two alternatives.) Estimated sales volume tA $ Cullumber Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 19% of sales. The income statement for the year ending December 31, 2025, is as follows. CULLUMBER BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2025 Sales $74,800,000 Cost of goods sold Variable $29,920,000 Fixed 8,830,000 38,750,000 Gross profit $36,050,000 Selling and marketing expenses Commissions $14,212,000 Fixed costs 10,333,400 24,545,400 Operating income $11,504,600 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 $6,732,000. Calculate the degree of operating leverage at sales of $74,800,000 if (1) Cullumber Beauty uses sales agents, and (2) Cullumber Beauty employs its own sales staff. (Round answers to 2 decimal places, e.g. 1.25.) (d) (1) Cullumber Beauty uses sales agents (2) Cullumber Beauty employs its own sales staff eTextbook and Media Degree of operating leverage 2.67 3.25 Attempts: 1 of 2 used Calculate the estimated sales volume in sales dollars that would generate an identical net income for the year ending December 31, 2025, regardless of whether Cullumber Beauty Corporation employs its own sales staff and pays them an 10% commission or continues to use the independent network of agents. (Hint: Set up an equation, with the net income formula employing independent agents as one side of the equation and the net income formula employing the company's own sales staff as the other side of the equation. Before solving, eliminate those aspects that are the same on each side of the equation as they do not vary under the two alternatives.) Estimated sales volume tA $
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Accounting Tools for business decision making
ISBN: 978-0470095461
4th Edition
Authors: kimmel, weygandt, kieso
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