Data concerning Tietz Corporation's single product appear below:
Selling Price- $180 per unit
variable expenses- $36
Contribution margin- $144
Fixed expenses are $1,044,000 per month. The company is currently selling 9,000 units per month.
Required:
The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $14 per unit. In exchange, the sales staff would 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 400 units. What should be the overall dollar effect on the company's monthly net operating income of this change? Show your work! Should the corporation make the change? Yes or no.