Question
ThomasT produces and sells a vacuums: Per unit % Selling price 180 100% Variable expense 54 30% Contribution margin 126 70% Fixed expenses are $505,000
ThomasT produces and sells a vacuums:
Per unit %
Selling price 180 100%
Variable expense 54 30%
Contribution margin 126 70% Fixed expenses are $505,000 per month. The company is currently selling 5,000 units per month. Tommy, the marking manager would like to introduce sales commissions as an incentive for his sales staff. Tommy has proposed a commission of $16 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $65,000 per month. Sales staff salaries expenses are considered fixed expenses. Tommy predicts that introducing this sales incentive would increase monthly sales by 100 units. What should be the overall effect on the company's monthly net operating income of this change?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started