Appendix Three (CostVolumeProfit Analysis} Objective: Based on the following Contribution Margin Income Statement the consulting group would like to evaluate if adding sales expenses as a fixed cost would be a beneficial strategy. Scenario: Projected Contribution Margin Income Statement Sales volume of -acka-ed food itemslunits} 50,000 Revenue Variable expenses Contribution margin Fixed Expenses S 200.000 Net Operating Income S 100,000 Methodology: The consulting group would assume that all packaged food items sell at the same price per unit. The above model assumes that sales commission is a variable expense and that salespersons are paid for each unit the; sell. In order to incentivize salespersons, the consulting group is proposing that salespersons be hired on salary and not on commission basis. Combine this with additional advertising, the fixed expenses would increase to S 250,000. This would also lead to an increase in revenue to the extent of 50% and net operating income by 25%. Variable expenses would not increase at the same rate as revenue. The group will calculate the breakeven sales under the above scenario and breakeven sales dollars at that level. They will also advise the business partners on potential risks that may arise in this case and recommend if this approach of adding xed cost related to selling is recommended. \f