Increase of $9,800 Increase of $9,800 Increase of $745,800 Increase of $104,200
ID: 2357277 • Letter: I
Question
Increase of $9,800
Increase of $9,800
Increase of $745,800 Increase of $104,200 Increase of $55,400 Data concerning Knipp Corporation's single product appear below: Fixed expenses are $587,000 per month. The company is currently selling 4,000 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 $57,000 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? Increase of $9,800 Increase of $745,800 Increase of $104,200 Increase of $55,400Explanation / Answer
ANSWER : Increase of $9,800 .
Procedure:
Total Contribution with Increased sales = (184 - 16) x4100 = $688800
Total Income = 688800 - (587,000 - 57000) = $158800
Actual income from sales = (4000 x 184) - 587000 =$149000
Net Increase = $158800 - $149000 = $9,800