Gorka, Inc. produces a single product that sells for $125. Variable expenses are $25 and fixed expenses are $450,000 per month. The company sold 6,000 units in April and anticipates monthly sales to remain at that level throughout the remainder of the year. The marketing manager believes the company can increase the number of units sold by having a portion of the sales staff salaries be dependent on sales volume. The manager has suggested a commission of $10 per unit. In exchange, the sales staff would accept a decrease in their total monthly salaries of $50,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 200 units. What would be the expected effect on the company's monthly net operating income of this change?
Gorka, Inc. produces a single product that sells for $125. Variable expenses are $25 and fixed expenses are $450,000 per month. The company sold 6,000 units in April and anticipates monthly sales to remain at that level throughout the remainder of the year. The marketing manager believes the company can increase the number of units sold by having a portion of the sales staff salaries be dependent on sales volume. The manager has suggested a commission of $10 per unit. In exchange, the sales staff would accept a decrease in their total monthly salaries of $50,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 200 units.
What would be the expected effect on the company's monthly net operating income of this change?
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