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What should be the overall effect on net operating income

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Question - Data concerning Ulwelling Corporation's single product appear below:

Per Unit Percent of SalesSelling price$140   100%Variable expenses 28   20%Contribution margin$112   80%

Fixed expenses are $1,055,000 per month. The company is currently selling 9,700 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 $10 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $101,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 300 units.

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

Reference no: EM131714877

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