The company is considering giving greater discounts on the gallon and half-gallon packages of ice cream. It is estimated that the effects of this pricing policy would be to reduce the average selling price per gallon by 2.5%. Compute the effect of such a price reduction on the additional gallons of ice cream a store must sell in a month to break even. contribution margin= $4.80 per gallon. Retail sales price averages $12 per gallon of ice cream. Monthly fixed operating expenses for a typical store are $9,000. Go back to the original situation. The sales manager estimates that if the price charged is reduced by 5%, the volume sold can be increased by 10%. Would you recommend the strategy of price reduction? Why? Show your computations. Go back to the original situation. Management is considering a change in the method of compensating store managers. Instead of a fixed salary of $2,550 per month, it is proposed that managers be put on a salary of $1,740 per month plus a commission of 72 cents per gallon of sales. 

What sales revenue per store will be necessary to yield Parag the same monthly income under the proposed incentive compensation arrangement?