A company sells its product at P30 per unit. Unit variable cost is P22 and total fixed costs total to P100,000 per month. The company currently pays salaries of P40,000 per month but with no commission. It is considering a compensation plan whereby the salespeople would receive 5% commission based on sales, but their salaries would be decreased to P25,000 per month. At what sales level is the company indifferent between the two compensation plans?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A company sells its product at P30 per unit. Unit variable cost is P22 and total fixed costs total to P100,000 per month. The company currently pays salaries of P40,000 per month but with no commission. It is considering a compensation plan whereby the salespeople would receive 5% commission based on sales, but their salaries would be decreased to P25,000 per month. At what sales level is the company indifferent between the two compensation plans?

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