Question
You are the corporate controller for a company that sells manufactured products, and your salespeople are all compensated on commission. You know that your products,
You are the corporate controller for a company that sells manufactured products, and your salespeople are all compensated on commission. You know that your products, as currently priced, generate a contribution margin percentage of 20%. Now, you are approached by your top sales person who pleads for a 10% discount in the sales price, offering to increase company sales by 20%. Assume the business is currently making $1 million in profit, and that the sales price for all product sales going forward would be reduced by 10%. If every sales person could increase sales by 20%, would the sales discount be justified? Assume current sales volume (before the discount) is $10 million. Also, what would be the fixed costs in this scenario?
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