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Company Beta is producing and selling product Delta. The current sales volume is 6,000 units per month, with a fixed expense of 500,000 per month.
Company Beta is producing and selling product Delta. The current sales volume is 6,000 units per month, with a fixed expense of 500,000 per month. The selling price is 140 per unit, with a contribution margin ratio of 60%. In order to increase sales to 7,500 units per month, the sales manager of Beta introduces a sales commission of 25 per sold unit. In exchange, the sales staff would accept an overall decrease in salary with 180,000. Analyze and discuss how the introduction of sales commission would overall affect the monthly contribution margin, the contribution margin ratio and the monthly net operating income. Show all relevant calculations. Units: = Sales Variable expenses Contribution margin Fixed expenses = Net income
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