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
|Cost of goods sold|
|Selling and marketing expenses|
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.