Answer:
Income will decrease by $1,700.
Explanation:
Giving the following information:
Selling price= $140
Variable expenses= 28
Contribution margin= 112
Fixed expenses are $720,000 per month.
The company is currently selling 8,000 units per month.
The marketing manager has proposed a commission of $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $60,000 per month.
Sales would increase by 100 units.
<u>We need to calculate the effect of this change on the monthly income. We need to calculate the increase in units, the decrease in fixed costs, and the increase of variable costs.</u>
<u></u>
New variable cost= 28 + 9= 37
Effect on income= 100* (140 - 37) + 60,000 - (9*8,000)
Effect on income= -$1,700
Income will decrease by $1,700.
