Ask Question
BusinessBusiness
20 March, 10:40

Data concerning Hinkson Corporation's single product appear below: Per Unit Percent of Sales Selling price $ 140 100 % Variable expenses 28 20 % Contribution margin 112 80 % Fixed expenses are $720,000 per month. The company is currently selling 8,000 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 $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $60,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 100 units. What should be the overall effect on the company's monthly net operating income of this change?

+4
Answers (2)
  1. 20 March, 13:30
    0
    Therefore, The overall effect would be that the net operating income per month will decrease by $1,700

    Explanation:

    According to the given data the Revised net selling price per unit = $140 - sales commission = $140 - 9 = $131 / unit

    To calculate the overall effect on the company's monthly net operating income of this change we would make the following calculations:

    Units sold 8000 8100 Increase / decrease

    sales revenue $131 per unit $ 1,120.000 $ 10,61,100 $ - 58,900

    Less: variable cost $28 per unit $ 224,000 $ 2,26,800 $ 2,800

    Contribution $ 8,96,000 $ 8,34,300 $ - 61,700

    Fixed expense $ 7,20,000 $ 6,60,000 $ - 60,000

    Net Operating Income $ 1,76,000 $ 1,74,300 $ - 1,700

    Therefore, The overall effect would be that the net operating income per month will decrease by $1,700
  2. 20 March, 13:54
    0
    Income will decrease by $1,700.

    Explanation:

    Giving the following information:

    Selling price = $140

    Variable expenses = 28

    Contribution margin = 112

    Fixed expenses are $720,000 per month.

    The company is currently selling 8,000 units per month.

    The marketing manager has proposed a commission of $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $60,000 per month.

    Sales would increase by 100 units.

    We need to calculate the effect of this change on the monthly income. We need to calculate the increase in units, the decrease in fixed costs, and the increase of variable costs.

    New variable cost = 28 + 9 = 37

    Effect on income = 100 * (140 - 37) + 60,000 - (9*8,000)

    Effect on income = - $1,700

    Income will decrease by $1,700.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Data concerning Hinkson Corporation's single product appear below: Per Unit Percent of Sales Selling price $ 140 100 % Variable expenses 28 ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
If bagels and doughnuts are substitute goods, then which scenario is likely to occur if the price of bagels is reduced? a. The demand curve for doughnuts will shift to the left. b. There will be a leftward movement along the bagel demand curve. c.
Answers (1)
When a government collects more revenue in one year than it spends, there is a budget?
Answers (1)
Eric believes works hard he will meet management's goals and that if he meets management's goals, he will get a raise, which he very much wants. Which process theory is this most consistent with?
Answers (1)
Econ-jammin' has recently discovered that its fans are made up of two distinct groups, which they can easily distinguish.
Answers (1)
LO 3.1Define and explain contribution margin ratio.
Answers (1)
New Questions in Business
Darren is a certified interior designer with a lucrative client list in the city of kelsa, situated in the state of touslon. his business affords him a substantial amount of goodwill from his clients.
Answers (1)
The Shoal Company's manufacturing costs for the third quarter of 2019 were as follows: (CPA adapted) Direct materials and direct labor $ 770,000 Other variable manufacturing costs 135,000 Depreciation of factory building and manufacturing equipment
Answers (1)
Which of the following individuals are required to pay taxes to fund Social Security and Medicare? A. Employees. B. Employers. C. Self-employed individuals. D. Employees, employers, and self-employed individuals.
Answers (1)
Mopsun, a garment store, sells customized hoodies at $7 per unit. the total fixed costs add up to $8000 per year, and the variable costs add up to $3 per unit. how many hoodies should mopsun sell every year in order to cover all costs?
Answers (1)
Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12. On the basis of this information we can say that:A. profits will be increased by hiring additional workers. B.
Answers (1)
Home » Business » Data concerning Hinkson Corporation's single product appear below: Per Unit Percent of Sales Selling price $ 140 100 % Variable expenses 28 20 % Contribution margin 112 80 % Fixed expenses are $720,000 per month.
Sign Up Forgot Password?