USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION Data concerning Homme
ID: 2410156 • Letter: U
Question
USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT QUESTION
Data concerning Homme Corporation's single product appear below:
The company is currently selling 2,000 units per month. Fixed expenses are $130,000 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 $14 per unit. In exchange, the sales staff would accept a decrease in their salaries of $24,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager 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?
Decrease of $45,800
Increase of $154,200
Increase of $22,600
Increase of $2,200
Decrease of $45,800
Increase of $154,200
Increase of $22,600
Increase of $2,200
Per Unit Percent of Sales Selling price Variable expens. Contribution margin. S190 114 100% 60% 40% 574 % 76Explanation / Answer
Hence increase in Net operating income=(24200-22000)
=$2200 increase(D).
Current Proposed Sales (190*2000)=$380000 190*(2000+100))=$399000 Less:Variable costs (114*2000)=$228000 (114+14)*(2000+100)=$268800 Contribution margin $152000 $130200 LEss:Fixed costs (130000) (130000-24000)=($106000) Net operating income $22000 $24200Related Questions
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