Question-2:

Huzaifas toys produces lucrative toys forkids. 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 expense
Selling Price	$40
Variable costs		Advertising	$40,000
Material costs	$17	Rent	$25,000
Sales commission	$5.5	Salaries	$130,000

Required:

1. For the coming financial year, the management has decided to boost the net operating income, as part of this decision the company will give sale commission to the sales staff based on her product sold. Assume the company has 2 different products, product 1: Sales per unit $5 and CM $3.5 per unit, Product 2: Sales per unit $7and CM per unit $2. Comment on the decision made by the management.