Data concerning Ulwelling Corporation\'s single product appear below: Per Unit $

Question

Data concerning Ulwelling Corporation's single product appear below: Per Unit $190 Percent of Sales Selling price Variable expenses Contribution margin 100% 20% 80% 38 $152 Fixed expenses are $1,033,000 per month. The company is currently selling 9,600 units per month The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $13 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $113,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 420 units. Required: What should be the overall effect on the company's monthly net operating income of this change? (Negative amount should be indicated by a minus sign.) nge in net operating inco 26

Explanation / Answer

Solution:

Change in net operating income = $246780 - $426200 = - $179,420

Computation of Monthly Net operating income (without proposed sales incentive) Particulars Per Unit Total Sales Revenue (9600*$190) $190.00 $1,824,000.00 Variable Cost $38.00 $364,800.00 Contribution Margin $152.00 $1,459,200.00 Fixed Expenses $1,033,000.00 Net Operating Income $426,200.00

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