Moloney Corporation produces and sells a single product.Data concerning that product appear below: Fixed expenses are $898,000 per month.The company is currently selling 9,000 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 $16 per unit.In exchange,the sales staff would accept a decrease in their salaries of $117,000 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

Moloney Corporation produces and sells a single product.Data concerning that product appear below:  Fixed expenses are $898,000 per month.The company is currently selling 9,000 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 $16 per unit.In exchange,the sales staff would accept a decrease in their salaries of $117,000 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?

Quizplus · Accepted Answer

11eaaee8_6781_d96d_933a_e9578fedb2cb_TB5186_00 Decrease in net operating income: $182,000 - $165,400 = $16,600

Moloney Corporation Produces and Sells a Single Product