Laro Corporation produces and sells a single product with the following characteristics:
|
Per unit |
Percent of sales |
| Selling price |
$ 220 |
100% |
| Variable expenses |
110
|
50%
|
| Contribution margin |
$ 110
|
50%
|
|
The company is currently selling 5,700 units per month. Fixed expenses are $323,000 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 $47,000 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 170 units. What should be the overall effect on the company's monthly net operating income of this change?