3. To determine the volume of sales at which net income would be equal
under either the 20% commission plan or the company sales force plan,
we find the volume of sales where costs before income taxes under the
two plans are equal.
X = Total sales revenue
0.65X + $4,800,000 = 0.525X + $7,125,000
0.125X = $2,325,000
X = $2,325,000 ÷ 0.125
Case 6-33 (continued)
Thus, at a sales level of $18,600,000 either plan would yield the same
income before taxes and net income. Below this sales level, the commis-
sion plan would yield the largest net income; above this sales level, the
sales force plan would yield the largest net income.
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