Winter Sales, Inc. sells many kinds of winter sports equipment, primarily through telemarketing. Its sales staff are paid 15% of all sales dollars generated. In order to decrease the uncertainty of this arrangement for its staff and increase loyalty, the company is considering a change in the method of payment. The company would like to pay its 100 employees $1000 per month plus 10% of sales. Using cost-volume-profit analysis, what volume of sales dollars does the company need to exceed per month to make this new method more profitable for the company than the old method?

Question

Quizplus · Accepted Answer

To find the break-even point where the new method becomes more profitable, set the total cost of both methods equal: 0.15x = 1000*100 + 0.10x. Solving for x gives x = $2,000,000.