What should be the overall effect on the company's monthly net operating income of this change?
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Question No. 3 CVP – Applied: Revising Sales Incentives
Data concerning Wislocki Corporation's single product appear below:
Per Unit Percent of Sales
Selling price
$ 180 100 %
Variable expenses
45 25 %
Contribution margin
$ 135 75 %
Fixed expenses are $1,048,000 per month. The company is currently selling 9400 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 $12 per unit. In exchange, the sales staff would accept
an overall decrease in their salaries of $106,000 per month. The marketing manager predicts that
introducing this sales incentive would increase monthly sales by 440 units.
Required:
What should be the overall effect on the company's monthly net operating income of this change?
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