Question

Problem 6-119 (Algo) [LO 6-1, 6-4) Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 5% commission on the units they sell for $100 each, plus a fixed salary of $40,600 per person. Glade hopes that by increasing commissions to 10% and decreasing each salesperson's salary to $20,600, sales will increase because salespeople will be more motivated. Currently, sales are 14,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $594,000. Glade's other variable costs, NOT including commissions, total $14 per unit. a. What is the current profit? Current Profit b. What is the current break-even point in units? (Round your answer to the nearest whole number.) Break-Even Point units c. What would the break-even point in units be if commissions are increased and salaries decreased? (Round your answer to the nearest whole number.) Break-Even Point units

Answer 1

CORRENT PROPOSED PARTICULARS Sales units 14,000 vite 27.000 miste doa 100 Sales price Less: Variable Cast Other Variable Cost 14 А Sales Commission 5 5 10 Total Variable Cast 24 Contribution 81 76 Total Contribution 11,34,000 20,52,000 less: Fixed Cast Fixed Salary 40,600 20,600 Other Fixed Cost 5,94,000 5,94,000 Total Fixed Cost 6,34,600 6.14,600 PROFIT $ 4,99,400 1$ 14,37400 > Guerent Profit = $4.98,400 27 Break-even point in units Fixed Cast / Contribution Percuit $6,34,600/81 $_7,835 uits 3) Nem break-even point in wits Fixed Cast Contribution Peruut $ 6,14,600/76 8,087 with 47 New Profit = $14, 37, 400 52 fference of Fixed Cast ($634,600-$6,14600 Difference of Variable Cost ($8) -$70 = Die units