Bonita Beauty Corporation manufactures cosmetic products that are sold through a
ID: 2340866 • Letter: B
Question
Bonita 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, 2020, is as follows. BONITA BEAUTY CORPORATION Income Statement For the Year Ended December 31, 2020 Sales $74,800,000 Cost of goods sold Variable Fixed Gross margin $29,920,000 8,830,000 38,750,000 $36,050,000 Selling and marketing expenses $14,212,000 Commissions Fixed costs Operating income 10,333,400 24,545,400 $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. 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 2020. Break-even point Attempts:0 of 4 used ChecExplanation / Answer
Answer:
Under the currant policy break even point is as under
Sales
74,800,000
100%
Less: variable cost (29,920,000+14,212,000)
44132000
59%
Contribution margin
30,668,000
41%
Less: Fixed cost (8,830,000+10,333,400)
19163400
26%
Net Income
11,504,600
15%
Break even point
=Fixed cost / Contribution margin ratio
=19163400/ 41%
=46,740,000
Break even point =46,740,000
Sales
74,800,000
100%
Less: variable cost (29,920,000+14,212,000)
44132000
59%
Contribution margin
30,668,000
41%
Less: Fixed cost (8,830,000+10,333,400)
19163400
26%
Net Income
11,504,600
15%