P$6\mathrm{.}6($LO $1,4),$ AN Bonita Beauty Corporation manufactures cosmetic 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 $31,2022,$ is as follows.

Bonita Beauty Corporation

Income Statement

For the Year Ended December $31,2022$

The company is considering hiring its own sales staff to replace the network of agents. It will pay its

salespeople a commission of $8\%$ and incur additional fixed costs of $$7\mathrm{.}5$ million.

Instructions

a$.$ Under the current policy of using a network of sales agents, calculate the Bonita Beauty Corpora$-$

tion's break$-$even point in sales dollars for the year $2022.$

b$.$ Calculate the company's break$-$even point in sales dollars for the year $2022$ if it hires its own sales

force to replace the network of agents.

Determine contribution margin, break$-$

even point, target sales, and degree of

operating leverage.

a$.$ $$47,175,000$

$6-50$ CHAPTER $6$ Cost$-$Volume$-$Profit Analysis: Additional Issues

$(2)3\mathrm{.}37$

c$.$ Calculate the degree of operating leverage at sales of $$75$ million if $(1)$ Bonita Beauty uses sales

agents, and $(2)$ Bonita Beauty employs its own sales staff. Describe the advantages and disadvan$-$

tages of each alternative.

d$.$ Calculate the estimated sales volume in sales dollars that would generate an identical net income for

the year ending December $31,2022,$ regardless of whether Bonita Beauty Corporation employs its own

sales staff and pays them an $8\%$ 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.$)$