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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- earns a 7% commission on the units they sell for $100 each, plus a fixed salary of $42,000 per person. Glade hopes that E commissions to 12% and decreasing each salesperson's salary to $20,400, sales will increase because salespeople will be motivated. Currently, sales are 23,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $59 Glade's other variable costs, NOT including commissions, total $13 per unit. a. What is the current profit? Current Profit $ 412,000

Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five- earns a 7% commission on the units they sell for $100 each, plus a fixed salary of $42,000 per person. Glade hopes that E commissions to 12% and decreasing each salesperson's salary to $20,400, sales will increase because salespeople will be motivated. Currently, sales are 23,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $59 Glade's other variable costs, NOT including commissions, total $13 per unit. a. What is the current profit? Current Profit $ 412,000

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 salespec earns a 7% commission on the units they sell for $100 each, plus a fixed salary of $42,000 per person. Glade hopes that by increas commissions to 12% and decreasing each salesperson's salary to $20,400, sales will increase because salespeople will be more motivated. Currently, sales are 23,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $593,000 Glade's other variable costs, NOT including commissions, total $13 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.) $ 412,000 Break-Evon Point 299,000 units 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 d. If sales increase by 13,000 units, what will profit be under the new plan? Profit Under the New Plan units d. If sales increase by 13,000 units, what will profit be under the new plan? Profit Under the New Plan Point of Indifference e. At what sales level would Glade be indifferent between the lower-commission plan and the higher-commission plan? units
Transcribed Image Text:Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespec earns a 7% commission on the units they sell for $100 each, plus a fixed salary of $42,000 per person. Glade hopes that by increas commissions to 12% and decreasing each salesperson's salary to $20,400, sales will increase because salespeople will be more motivated. Currently, sales are 23,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $593,000 Glade's other variable costs, NOT including commissions, total $13 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.) $ 412,000 Break-Evon Point 299,000 units 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 d. If sales increase by 13,000 units, what will profit be under the new plan? Profit Under the New Plan units d. If sales increase by 13,000 units, what will profit be under the new plan? Profit Under the New Plan Point of Indifference e. At what sales level would Glade be indifferent between the lower-commission plan and the higher-commission plan? units
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