Answer:
the question is incomplete, so I looked for the requirements of similar questions:
<em>A. Calculate the company’s break-even point in sales dollars for the year 2014 if it hires its own sales force to replace the network of agents.
</em>
<em>B. Calculate the degree of operating leverage at sales of $75,000,000 if (1) Bonita Beauty uses sales agents, and (2) Bonita Beauty employs its own sales staff.</em>
a) total sales = $75,000,000
variable costs:
COGS $31,500,000
commissions $6,000,000
total variable costs = $37,500,000
contribution margin ratio = $37,500,000 / $75,000,000 = 0.5
total fixed costs = $8,610,000 + $10,260,000 + $7,500,000 = $26,370,000
break even point in $ = $26,370,000 / 0.5 = $52,740,000
b) one of the formulas that we can use to calculate the degree of operating leverage is:
operating leverage = fixed costs / total costs
1) total costs using sales agents = $63,870,000
total fixed costs = $8,610,000 + $10,260,000 = $18,870,000
degree of operating leverage = $18,870,000 / $63,870,000 = 29.54%
2) total costs employing its own sales staff = $6,000,000 + $31,500,000 + $26,370,000 = $63,870,000
total fixed costs = $26,370,000
degree of operating leverage = $26,370,000 / $63,870,000 = 41.29%
