Sannella Corporation produces and sells a single product.Data concerning that product appear below:
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?

Question

Sannella Corporation produces and sells a single product.Data concerning that product appear below:
 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?

Quizplus · Accepted Answer

11ea7761_185f_672f_81a5_93e7e7491b2e_TB2580_00 Net operating income would increase by $14,600.

Sannella Corporation Produces and Sells a Single Product