Question

Data concerning Wislocki Corporation's single product appear below: Per Unit Percent of Sales Selling price $ 190 100 % Variable expenses 38 20 % Contribution margin $ 152 80 % Fixed expenses are $1,033,000 per month. The company is currently selling 9,600 units per month. Required: The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $13 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $113,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 420 units. What should be the overall effect on the company's monthly net operating income of this change

Answer 1

Answer:

$46,580

Explanation:

Calculation for What should be the overall effect on the company's monthly net operating income of this change

First step is to calculate the New contribution margin

New contribution margin= 152 - 13

New contribution margin = 139

Second step is to calculate the New units monthly sales

New units monthly sales= 9,600 + 420

New units monthly sales= 10,020

Third step is to calculate the New total contribution margin

New total contribution margin= 10,020 x 139

New total contribution margin= 1,392,780

Fourth Step is to calculate the Present total contribution margin

Present total contribution margin =9600 x 152

Present total contribution margin= 1,459,200

Now let calculate the Change in net operating income

Change in total contribution margin( 66,420)

(1,392,780-1,459,200)

Add savings in salesperson's salaries 113,000

Change in net operating income =$46,580

Therefore what should be the overall effect on the company's monthly net operating income of this change is $46,580