Question

Data concerning Wislocki Corporation's single product appear below:

	Per Unit			Percent of Sales
Selling price	$	200			100	%
Variable expenses		52			26	%
Contribution margin	$	148			74	%

Fixed expenses are $1,040,000 per month. The company is currently selling 9,900 units per month.

Required:

The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $14 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $106,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 450 units. What should be the overall effect on the company's monthly net operating income of this change?

Answer 1

I Answer: Current proposed Unity sold 9900 110350 (9.900+450) Saly a 1,980,000 20 70,000 6900 x 200) 110350x 200) variable expenses 514,800 6831100 16,900 X52) 1510,350x(52714)] Contribution | 1465,000 11,386,900 (C= aby margin Fixed expense @ 1040,000 1934,000 1,040,000-106,000) Inet operating 1425,200 452,900 Reac-d) Encome Hence overall effect - Enerease in het operating income (452,900 -425,200)= $ 27,700