BONITA BEAUTY CORPORATION Income Statement For the Year Ende

BONITA BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2017 Sales $79,300,000 Cost of goods sold Variable Fixed Gross margin $31,720,000 8,540,000 40,260,000 $39,040,000 Sellng and marketing expenses Commissions Fixed costs Operating income $14,274,000 10,750,000 25,024,000 $14,016,000 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 $6,344,000 Your answer is correct. Under the current policy of using a network of sales agents, calculate the Bonita Beauty Corporation\'s break-even point in sales dollars for the year 2017. (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answers to 0 decimal places, e.g 2,510.) Break-even point 45928571.4 SHOW SOLUTIONSHOW ANSWER LINK TO TEXT LINK TO TEXT Attempts: 1 of 3 used Calculate the company\'s break-even point in sales dollars for the year 2017 if it hires its own sales force to replace the network of agents. (Round intermediate calculations to 2 deci places e.g. 10.25 and final answers to 0 decimal places, e.g. 2,510.) Break-even point s LINK TO TEXT LINK TO TEXT Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWER

Solution

a)Contribution Margin Rato = Sales- Variable Costs/Sales

Existing: 33306000/79300,000 = 0.42

Existing Break Even Point = Fixed Costs/Contribution Ratio

=(8540000+10750,000)/0.42

=45928571.4

b)Revised Structure:

Sales = 79,300,000

Variable COGS = 31720,000

Variable Commission = 10% of Sales i.e 7,930,000

Contribution = 39650,000

Contribution Ratio = 39650,000/79300,000 = 0.5

Revised Fixed Costs = 8540,000+10750,000+6344,000

=25,634,000

Break-even point = 25,634,000/0.5

=512,68,000