Question

Houpe Corporation produces and sells a single product Data concerning that product appear below Het Selling price Variable expenses Contribution margin Per Unit $140 42 $ 98 Percent of Sales 100% 3ex 20 Fored expenses are $490.000 per month The company is currently selling 6.000 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 511 perunt in exchange the sales staff would accepta decrease in their salaries of $58.000 per month. (This is the company's savings for the entire sales start) The marketing manager predicts that introducing this sales incentive would increase morty sales by 100 units. What should be the overall effect on the company's monthly net operating income of this change? Murple Choice Increase of 5700 increase of 0.00 decree of $500 < Prev 100 10 AM PI

Answer 1

CORRECT ANSWER INCREASE OF $700 BEFORE CHANGE Particulars Notations Per unit Price $140 Less: Variable expens (6) $42 contribution (c) = (a-b) $98 Less: fixed Expenses (d) (e) =(c-d) Income Amount $840000 ($140 x 600o) $252000 ( $42x600) $ 58800s ($98x6000 $490000 $ 98000 Net Opereting AFTER CHANGE Particulars Notatious Per unit Price $140 Less : Variable Expenses (6) $42 Contribution c) = (a-b) $98 Less, fixed Expenses (d) Selling Price Amounts $ 854000 ($140x6100 $323300 ($53 x 6100) $530700 ($87 x 6100) $432000 $98700 Nor Operation come (e) = {_-d) Thus, There is Increase in Net $700 ($98700 $ 98000 Opereting Income by 병 it comes Notes: Earlien units 6000 unit, after increase of 100 uur 6100 units (6000 +100) Variable Expenses per unir canken was $42 pin unit after licentive increase of $ 11 per unir it comes to $ 53 | $42+ $11)