Reference no: EM131285226

The following is the budgeted income statement for the coming year prepared by Luca DeCenzo, the company's controller. The Costs of Collections should be treated as 100% variable. GTA Collection Agency Budgeted Income Statement Sales $ 15,000,000 Costs of Collections 9,000,000 Gross Profit $ 6,000,000 Selling & Admin Exp Commissions 3,000,000 Support Personnel 855,000 All other expenses 150,000 4,005,000 Net Income $ 1,995,000 The Collections Division contracted with independent collection agencies and paid them 20% of the recovery. The independent agencies felt they should receive 25% in the coming year as a reward for making GTA Collections Agency one of the most successful in the business. For several years the GTA partners had been discussing the possibility of employing their own collection teams and firing the agencies. As result of these last minute demands they are seriously considering implementing this change and believe the following are the costs associated with hiring their collection teams as direct employees: Fixed Costs Variable Costs Collection Team 1 $ 125,0000 + 5% of sales Collection Team 2 $ 240,000 N/A All other fixed costs, as well as the variable cost percentages, would remain the same as the estimates in the budgeted income statement. PART B Requirements: (Show your work or no credit will be given) 1. Compute the breakeven in sales dollars using the budgeted income statement. 2. Compute the breakeven in sales dollars meeting the agencies demands. 3. Compute the breakeven in sales dollars assuming the collection teams are hired directly