Question - Dustin Corporation produces and sells a single product. Data Concerning that product appears below:
Per Unit Percentage of Sales
Selling Price $120 100%
Variable Cost $ 36 30%
Contribution Margin $84 70%
Fixed Cost are $516, 000 per month. The company is currently selling 7,000 units per month
The marketing manager would like to introduce sales commissions as a incentive for the sales staff. The marketing manager has proposed a commission of $9.00 per unit. in exchange, the sale staff would d accept an overall decrease in their salaries of $55,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 200 units. What should be the overall effect on the company monthly operating profit of these changes?
First find the new CM. Second figure out the new total CM at the new sales level. Third figure out the difference lost in sales cm on total new sales, less the cost saved and decided if it's a good decision.