Bonita beauty corporation manufactures cosmetic products that are

Bonita Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2017, is as follows.

BONITA BEAUTY CORPORATION
Income Statement
For the Year Ended December 31, 2017

Sales       $77,400,000
Cost of goods sold        
    Variable   $37,152,000    
    Fixed   8,660,000   45,812,000
    Gross margin       $31,588,000
Selling and marketing expenses        
    Commissions   $13,932,000    
    Fixed costs   10,800,000   24,732,000
    Operating income       $6,856,000

The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 8% and incur additional fixed costs of $7,740,000.

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