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.

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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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