This question is to be considered independently of all other questions relating to Homme Corporation. Refer to the original data when answering this question. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $14 per unit. In exchange, the sales staff would accept a decrease in their salaries of $24,000 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?

Question

Quizplus · Accepted Answer

The increase in sales by 100 units results in additional revenue, but the commission cost per unit is $14, leading to an additional cost of $1,400. The savings from reduced salaries is $24,000. The net effect is an increase in net operating income by $2,200 ($24,000 - $1,400).

This Question Is to Be Considered Independently of All Other