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27 October, 12:32

what is the profit impact if walmart pays a $!0 sales commission per bike sold instead of paying sales persons flat slalaries that currently total $5000 per month (not included in the current fixed cost) ? This would increase unit sales from 400 to 40 bikes. The current total fixed cost is $50,000

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  1. 27 October, 13:59
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    The profit impact if walmart pays a $10 sales commission per bike sold instead of paying sales persons flat slalaries that currently total $5000 per month (not included in the current fixed cost) is $15,400.

    Explanation:

    Current Situation Proposed Situation

    No. of Bikes sold 400 bikes 460 bikes

    Sales price per unit $750 $750

    Total Sales $300,000 $345,000

    Variable cost (400*$500) (460*$500) ($200,000) ($230,000)

    Contribution Margin $100,000 $115,000

    Salaries ($5,000) (0)

    Sales commission (460 bikes*$10) (0) ($4,600)

    Net operating income $95,000 $110,400

    Net Increase in Net operating income = $110,400 - $95,000

    = $15,400

    Therefore, The profit impact if walmart pays a $10 sales commission per bike sold instead of paying sales persons flat slalaries that currently total $5000 per month (not included in the current fixed cost) is $15,400.
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