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

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.