Monterey Co. makes and sells a single product. The current selling price is $15 per unit. Variable expenses are $9 per unit, and fixed expenses total $27,000 per month. (Unless otherwise stated, consider each requirement separately.)

f-1. Calculate the monthly operating income (or loss) that would result from a $1 per unit price increase and a $6,000 per month increase in advertising expenses, both relative to the original data. Assume a sales volume of 5,400 units per month.

Monterey Co. makes and sells a single product. The current selling price is $15 per unit. Variable expenses are $9 per unit, and fixed expenses total $27,000 per month. (Unless otherwise stated, consider each requirement separately.)

Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople is paid a salary of $2,500 per month. g-1. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.80 per unit, assuming a sales volume of 5,400 units per month.

g-2. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.80 per unit, assuming a sales volume of 6,000 units per month.

h-1. Assuming that the sales volume of 6,000 units per month achieved in part g could also be achieved by increasing advertising by $1,000 per month instead of changing the sales force compensation plan. What would be the operating income or loss?

h-2. Which strategy would you recommend? multiple choice

Plan to change the sales force compensation.

Plan to increase advertising expenses.