Data concerning Bazin Corporation\'s single product appear below: Per Unit Perce
ID: 2558974 • Letter: D
Question
Data concerning Bazin Corporation's single product appear below: Per Unit Percent of Sales Selling price $ 100 100 % Variable expenses 20 20 % Contribution margin $ 80 80 % Fixed expenses are $384,000 per month. The company is currently selling 6,000 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 $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $46,000 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 500 units. What should be the overall effect on the company's monthly net operating income of this change?
Explanation / Answer
Calculate overall effect of company's net operating income :
Net operating income will increase by (123500-96000) = 27500
Present Proposed Sales 6000*100 = 600000 6500*100 = 650000 Variable cost 6000*20 = 120000 6500*29 = 188500 Contribution margin 480000 461500 Fixed expense 384000 384000-46000 = 338000 Net operating income 96000 123500Related Questions
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