FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Marathon Company makes and sells a single product. The current selling price is $20 per unit. Variable expenses are $12 per
unit, and fixed expenses total $59,800 per month. (Unless otherwise stated, consider each requirement separately.)
Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople is
paid a salary of $2,500 per month. Calculate the monthly operating income (or loss) that would result from changing the
compensation plan to a salary of $400 per month, plus a commission of $0.75 per unit, assuming a sales volume of 7,350
units per month. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to
a salary of $400 per month, plus a commission of $0.75 per unit, assuming a sales volume of 7,200 units per month.
Assuming that the sales volume of 7,200 units per month achieved in part g could also be achieved by increasing advertising
by $1,000 per month instead of changing the sales force compensation plan. What would be the operating income or loss?
Which strategy would you recommend?
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Transcribed Image Text:Marathon Company makes and sells a single product. The current selling price is $20 per unit. Variable expenses are $12 per unit, and fixed expenses total $59,800 per month. (Unless otherwise stated, consider each requirement separately.) Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople is paid a salary of $2,500 per month. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.75 per unit, assuming a sales volume of 7,350 units per month. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.75 per unit, assuming a sales volume of 7,200 units per month. Assuming that the sales volume of 7,200 units per month achieved in part g could also be achieved by increasing advertising by $1,000 per month instead of changing the sales force compensation plan. What would be the operating income or loss? Which strategy would you recommend?
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