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Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 11% commission on the units they sell for $100 each, plus a fixed salary of $40,400 per person. Glade hopes that by increasing commissions to 16% and decreasing each salesperson's salary to $20,900, sales will increase because salespeople will be more motivated. Currently, sales are 17,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $580,000. Glade's other variable costs, NOT including commissions, total $14 per unit. a. What is the current profit? Current Profit b. What is the current break-even point in units? (Round your answer to the nearest whole number.) Break-Even Point c. What would the break-even point in units be if commissions are increased and salaries decreased? (Round your answer to the nearest whole number.) Break-Even Point units Profit Under the New Plan units d. If sales increase by 13,000 units, what will profit be under the new plan?

Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 11% commission on the units they sell for $100 each, plus a fixed salary of $40,400 per person. Glade hopes that by increasing commissions to 16% and decreasing each salesperson's salary to $20,900, sales will increase because salespeople will be more motivated. Currently, sales are 17,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $580,000. Glade's other variable costs, NOT including commissions, total $14 per unit. a. What is the current profit? Current Profit b. What is the current break-even point in units? (Round your answer to the nearest whole number.) Break-Even Point c. What would the break-even point in units be if commissions are increased and salaries decreased? (Round your answer to the nearest whole number.) Break-Even Point units Profit Under the New Plan units d. If sales increase by 13,000 units, what will profit be under the new plan?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 11% commission on the units they sell for $100 each, plus a fixed salary of $40,400 per person. Glade hopes that by increasing commissions to 16% and decreasing each salesperson's salary to $20,900, sales will increase because salespeople will be more motivated. Currently, sales are 17,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $580,000. Glade's other variable costs, NOT including commissions, total $14 per unit. a. What is the current profit? Current Profit b. What is the current break-even point in units? (Round your answer to the nearest whole number.) Break-Even Point c. What would the break-even point in units be if commissions are increased and salaries decreased? (Round your answer to the nearest whole number.) Break-Even Point units Profit Under the New Plan units d. If sales increase by 13,000 units, what will profit be under the new plan?
Transcribed Image Text:Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 11% commission on the units they sell for $100 each, plus a fixed salary of $40,400 per person. Glade hopes that by increasing commissions to 16% and decreasing each salesperson's salary to $20,900, sales will increase because salespeople will be more motivated. Currently, sales are 17,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $580,000. Glade's other variable costs, NOT including commissions, total $14 per unit. a. What is the current profit? Current Profit b. What is the current break-even point in units? (Round your answer to the nearest whole number.) Break-Even Point c. What would the break-even point in units be if commissions are increased and salaries decreased? (Round your answer to the nearest whole number.) Break-Even Point units Profit Under the New Plan units d. If sales increase by 13,000 units, what will profit be under the new plan?
e. At what sales level would Glade be indifferent between the lower-commission plan and the higher-commission plan? Point of Indifference units
Transcribed Image Text:e. At what sales level would Glade be indifferent between the lower-commission plan and the higher-commission plan? Point of Indifference units
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