Taaibos $($T&B$)$ is a retailer of general merchandise $($fridges$/$ovens etc$)$ located in Randburg, Gauteng. Although T&B carries numerous articles on the inventory list, each article has approximately the same price

and invoice purchase cost. Sales personnel receive large commissions to encourage them to be more aggressive in their sales efforts. During the Covid pandemic during $2020$ & $2021,$ the South African economy was in

decline $$ imported goods became more expensive with the weakening of the South African Rand, and sales growth at T&B was poor. Furthermore, the industry was very competitive, and T&B had to rely on its

knowledgeable and courteous staff to attract and retain customers, who otherwise might go to other general merchandise stores. Below some basic information about prices and costs is shown.

T&B had R $12,5$ million of nett operating income in $2020$ when the selling price per unit was R $10,000$ per unit, the variable costs per unit was R $7,000$ and the total fixed costs were R $5$ million. Management expects per unit data

and total fixed costs to remain the same in $2021.$ The Managing Director $($MD$)$ of T&B is under pressure from shareholders to double nett income in $2021$ from the $2020$ base.

REQUIRED:

Calculate the number of units sold in $2020.$

Calculate the number of units that needs to be sold in $2021$ to reach the shareholders' expectation in terms of nett income.

Draw up the possible variable income statement for $2021.$

Assume that T&B sells the same of number of units in $2021$ as it did in $2020.$ What would the selling price have to be in order to reach the shareholders' desired profit level?

In order to double operating income in $2021$ the HR director is advising the MD that T&B needs to change the current commission based remuneration structure of sales staff to a fixed guaranteed remuneration structure

as this will motivate staff to increase sales and ultimately double operating profit. The HR director also proposes to increase the sales staff from the current $20$ to $40.$

You are the management accountant of T&B$.$ What are the benefits and the risks of the proposed remuneration structure change? Refer in your answer to the degree of operating leverage.