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Sales commissions as an incentive for the sales staff

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Reference no: EM131821143

Please assist me with this problem:

Data concerning Tietz Corporation's single product appear below:

Selling Price 200 per unit 100% of Sales

Variable expenses 52 per unit 26% of Sales

Fixed expenses are $1,040,000 per month. The company is currently selling 9,900 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 $14 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 450 units.

Required: What should be the overall effect on the company's monthly net operating income of this charge?

Reference no: EM131821143

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