This question is to be considered independently of all other questions relating

Question

This question is to be considered independently of all other questions relating to Boenisch Corporation.
Refer to the original data when answering this question.
The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $16 per unit. In exchange, the sales staff would accept a decrease in their salaries of $102,000 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 700 units. What should be the overall effect on the company's monthly net operating income of this change

decrease of $193,600

increase of $554,400

increase of $90,800

increase of $10,400

Explanation / Answer

Current Proposed Increase/ Decrease Units 8000 8700 700 Sales 170 1360000 1479000 119000 Less: Variable Cost 102 816000 1026600 (8700*(102+16) 210600 Contribution 544000 452400 -91600 Less: Fixed Cost 406000 304000 -102000 Net Operating Income 138000 148400 10400 The Net Operating Income will increase by $ 10400 The correct answer is D. increase of $ 10400

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