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Q 2: Huzaifas Toys produces lucrative toys for kids. Sales personnel are paid a substantial commission on each unit of toys sold plus small basic

Q 2: Huzaifas Toys produces lucrative toys for kids. Sales personnel are paid a substantial commission on each unit of toys sold plus small basic salary, in order to encourage them to be aggressive in their sales efforts.

PER UNIT

Monthly Fixed Expenses:

Selling price

$40

Variable costs:

Advertising

$40,000

Material costs

$17

Rent

$25,000

Sales commission

$5.5

Salaries

$130,000

Required:

  1. The management is planning to give sales commission based on sales revenue only, not cm per unit, suppose the company has 2 different products and both of them have different price ,vc and cm. Will this decision be wise? Comment on the decision. [ 3 Marks ]

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