Thornbrough Corporation produces and sells a single product with the following characteristics: Percent Per Unit of Sales Selling price Variable expenses $ 220 100% 44 20% Contribution margin $ 176 80% The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month. 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 a decrease in their salaries of $65,000 per month. (This is the company's savings for the entire sales staff.) 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?

Thornbrough Corporation produces and sells a single product with the following characteristics: Percent Per Unit of Sales Selling price Variable expenses $ 220 100% 44 20% Contribution margin $ 176 80% The company is currently selling 7,000 units per month. Fixed expenses are $901,000 per month. 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 a decrease in their salaries of $65,000 per month. (This is the company's savings for the entire sales staff.) 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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Artis Sales has two store locations. Store A has fixed costs of $205, 000 per month and a variable cost ratio of 55%. Store B has fixed costs of $ 380,000 per month and a variable cost ratio of 30 % . At what sales volume would the two stores have equal profits or losses?
Fruit Computer Company makes a fruit themed computer. Variable costs are $200 per unit, and fixed costs are $31,000 per month. Fruit Computer Company sells 500 units per month at a sales price of $320. The company believes that it can increase the price if the computer quality is upgraded. If so, the variable cost will increase to $230 per unit, and the fixed costs will rise by 25%. The CEO wishes to increase the company's operating income by 10%. Which sales price level would give the desired results? (Round your answer to the nearest cent.) O $371.30 per unit O $262.00 per unit O $378.00 per unit. O $1056.00 per unit < Previous
Selling price is $120 per unit. Variable costs are $78 per unit. Fixed expenses are $249,480 per month. The company is currently selling 6,000 units. The marketing manager believes it can increase sales revenue per unit to $130. It is also increase advertising by $10,000 increase in the monthly advertising budget would result in a 10 percent increase in monthly sales. If these changes are made, what is the net income expected to become? This time you have to calculate total Net Income.
Giddings Company manufactures and sells a single product, Product G. The product sells for $60 per unit and has a contribution margin ratio of 40 percent. The company's monthly fixed expenses are $28,800. If the selling price is reduced by 5%, variable costs per unit reduced by $1.00, and fixed costs increased to a total of $40,750, how many units would need to be sold to earn operating income equal to 10% of sales revenue? (Ignore income taxes.)
Houpe Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 140 100% Variable expenses 42 30% Contribution margin $ 98 70% Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month. 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 a decrease in their salaries of $58,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 100 units. What should be the overall effect on the company's monthly net operating income of this change?
Sannella Corporation produces and sells a single product. Data concerning that product appear below: Selling price Variable expenses Contribution margin Per Unit $ 220 66 $ 154 Percent of Sales 100% 30% 70% Fixed expenses are $991,000 per month. The company is currently selling 8,000 units per month. 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 a decrease in their salaries of $74,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 200 units. What should be the overall effect on the company's monthly net operating income of this change?
rally synthesis inc. manufactures and sells 100 bottles per day. fixed costs are $22,000 and the variable costs for manufacturing 100 bottles are $30,000. Each bottle is sold for $1,200. how would the daily profit be affected if the daily volume of sales drop by 10%?
Ozark Metal Company makes a single product that sells for $45.5 per unit. Variable costs are $29.1 per unit, and fixed costs total $65,355 per month. Required: a. Calculate the number of units that must be sold each month for the firm to break even. b. Assume current sales are $414,000. Calculate the margin of safety and the margin of safety ratio. c. Calculate operating income if 5,300 units are sold in a month. d. Calculate operating income if the selling price is raised to $48.5 per unit, advertising expenditures are increased by $10,000 per month, and monthly unit sales volume becomes 6,000 units. e. Assume that the firm adds another product to its product line and that the new product sells for $22 per unit, has variable costs of $16 per unit, and causes fixed expenses in total to increase to $87,000 per month. Calculate the firm's operating income if 5,300 units of the original product and 4,200 units of the new product are sold each month. For the original product, use the…
According to its original plan, Thornton Consulting Services Company plans to charge its customers for service at $127 per hour in Year 2. The company president expects consulting services provided to customers to reach 49,000 hours at that rate. The marketing manager, however, argues that actual results may range from 44,000 hours to 54,000 hours because of market uncertainty. Thornton's standard variable cost is $44 per hour, and its standard fixed cost is $1,320,000. Required Develop flexible budgets based on the assumptions of service levels at 44,000 hours, 49,000 hours, and 54,000 hours. Flexible Budget 44,000 Hours Flexible Budget Flexible Budget 49,000 Hours 54,000 Hours
The fixed costs of Chun Company are $309,000 and the total variable costs for its only product are 45% of the sales price, which is $100. Chun currently sells 7,400 units per month and is looking to sell more. Consider each of the following independently: The marketing manager thinks sales are too low in St. Kitts and Nevis and suggests that sales there would be increased by 120 units per month if an additional $9,000 per month was spent advertising there. What should be the effect on monthly income if this additional advertising is done? (DECREASE BY 2400, DECREASE BY 4975, INCREASE BY 404,600, OR INCREASE BY 329400)