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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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?