Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Laro Corporation produces and sells a single product with the following characteristics: Per unit Percent of sales Selling price $ 230 100% Variable expenses 115

Laro Corporation produces and sells a single product with the following characteristics:

Per unit Percent of sales
Selling price $ 230 100%
Variable expenses

115

50%

Contribution margin

$ 115

50%

The company is currently selling 5,800 units per month. Fixed expenses are $326,000 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 $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $48,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 180 units. What should be the overall effect on the company's monthly net operating income of this change?

decrease of $81,120
increase of $14,880
increase of $681,880
increase of $47,820

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing And Assurance Services

Authors: Timothy Louwers, Robert Ramsay, David Sinason, Jerry Strawser

2nd Edition

0073128244, 9780073128245

More Books

Students also viewed these Accounting questions

Question

How to find if any no. is divisble by 4 or not ?

Answered: 1 week ago

Question

Explain the Pascals Law ?

Answered: 1 week ago

Question

What are the objectives of performance appraisal ?

Answered: 1 week ago

Question

Identify examples of loaded language and ambiguous language.

Answered: 1 week ago