Question

Saved Help Save & Exit Data concerning the single product a company sekk show that selling price and variable expenses per unit are $150 and $41, respectively. Fixed expenses are $1,056,000 per month. The company is currently selling 9,900 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $10 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $102,000 per month. T marketing manager predicts that introducing this sales incentive would increase monthly sales by 310 units. What should be the overall effect on the company's monthly net operating income of this change? (All answers are whole numbers - unless specified otherwise. You should NOT include the sign or a comma E. you should type 1000 for one thousand Negative numbers should be added with a minus Signe 1000 for decrease or loss of one thousand) The net operating income will increase or decrease by 5 23 of 26 Next > ce 3 End tra 2 3 $ 4 % 5 6 & 7 8 9 0 Backspace Q W E R T U ЈА S D F G N х V B N M AM Alt PRISC Ctri Poup

Answer 1

Current net operating income:

= [9,900 X ($150 - $41)] - $1,056,000

= $23,100

Net income if sales commission is paid:

= [(9,900 + 310) X ($150 - $41 - $10)] - ($1,056,000 - $102,000)

= $56,790

Net operating income increases by:

= $56,790 - $23,100

= $33,690