Thornbrough Corporation produces and sells a single product with the following characteristics: 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?

Question

Thornbrough Corporation produces and sells a single product with the following characteristics:  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?

Quizplus · Accepted Answer

11eacbfc_c784_12d6_8ffe_bf5d20f0242d_TB7552_00 Overall net operating income will increase by $37,500

Thornbrough Corporation Produces and Sells a Single Product with the Following