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a_sh-v [17]
3 years ago
6

Goldin Corporation currently pays its salesperson a flat salary of $5,000 per month and is considering paying him $20 per unit i

nstead. Sales are currently 200 units per month. Goldin believes the compensation change will increase unit sales by 50%. The current contribution margin is $80 per unit. If the change is implemented, net operating income will:
a. decrease by $1,000
b. decrease by $7,000
c. increase by $7,000
d. increase by $1,000
Business
1 answer:
Naddik [55]3 years ago
6 0

Answer:

The net operating income will c. increase by $7,000

Explanation:

The formula to calculate net operating income  is =

Gross income - Operating expenses

If  Sales are equal to 200 units  and the payment for a salesperson is

a flat salary of $5,000

Gross income = 200  * $80 = $16,000

and

Operating expenses = $5,000

so

Net operating income = $16,000  - $5,000 = $11,000

If  we rise the Sales to 300 units then the payment for the salesperson will be 20$ * 300 = $6,000.

Gross income = 300  * $80 = $24,000

and

Operating expenses = $6,000

so

Net operating income = $24,000 - $6,000 = $18,000

$18,000 -  $11,000 = $7,000

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The <u>law of increasing relative cost </u>states that the opportunity cost of producing a good always rises as one produces more of it.

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Opportunity cost is the value of other commodities or services you must forgo in order to get your desired item. The term "cost" as used by economists often refers to opportunity cost. Cost is frequently mentioned in conversations or on the news.

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