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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:
- 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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