Data concerning Ulwelling Corporation's single product appear below: Per Unit Percent of Sales Selling price $170 100% Variable expenses 51 30% Contribution margin $119 70% Fixed expenses are $753,000 per month. The company is currently selling 8,000 units per month. Required: The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $11 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $73,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 300 units. What should be the overall effect on the company's monthly net operating income of this change? Show your work!
Data concerning Ulwelling Corporation's single product appear below:
|
|
Per Unit |
Percent of Sales |
|
Selling price |
$170 |
100% |
|
Variable expenses |
51 |
30% |
|
Contribution margin |
$119 |
70% |
Fixed expenses are $753,000 per month. The company is currently selling 8,000 units per month.
Required:
The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $11 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $73,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 300 units. What should be the overall effect on the company's monthly net operating income of this change? Show your work!
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