What is HideAll break-even point in sales dollars

Assignment Help Managerial Accounting

Reference no: EM132800258

Question - HideAll Inc. manufactures storage products sold through a network of sales agents. These are independent sales agents are paid 18% commission on sales. The company reports annually and provides the following forecasted income statement for the year December 31, 2020:

HIDEALL INC. Income Statement Year Ending December 31, 2020
Sales		$78,805,000
Cost of goods sold
Variable	$37,826,400
Fixed	$7,890,000	$45,716,400
Gross margin		$33,088,600
Selling and marketing expenses
Commissions	$14,184,900
Fixed costs	$10,062,000	$24,246,900
Operating income		$8,841,700

HideAll stakeholders have been considering not using the independent sales representatives but rather replacing them with their own internal sales staff. They estimate the cost to do this require paying the internal salespeople a 9% commission and incur $7,092,450 in fixed costs.

Required -

A. What is HideAll's 2020 break-even point in sales dollars if they continue using independent sales agents, OR, should they hire an internal sales team to replace the independent sales agents?

B. What is HideAll's degree of operating leverage with sales of $78,805,000:

1. Using independent sales agents?

2. Employing its own sales staff?

C. What is HideAll's estimated dollar sales volume that generates an identical operating income for the year December 31, 2020, regardless of whether they employ a sales staff at 9% commission or continue to use independent agents?

D. Would you advise and/or recommend the decision-makers to continue with the status quo (current path) or implement the new plan with internal sales staff?

Reference no: EM132800258

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