Fixed expenses are $1,038,000 per month. The company is currently selling 9,700
ID: 2445970 • Letter: F
Question
Fixed expenses are $1,038,000 per month. The company is currently selling 9,700 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 $12 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $108,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 370 units.
Fixed expenses are $1,038,000 per month. The company is currently selling 9,700 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 $12 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $108,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 370 units.
Explanation / Answer
Solution:
(A). Inventory Valution Using Absorption Costing:
Variable Cost Per Unit
Variable Cost Per Unit = 7,36,100 / 35,710
= 20.6
Ending Inventory :
Begining Inventory = 8,490
Produced Inventory = 35,710
(-) Sales Units = 43,300
Balance = 900
Ending Inventory Value:
Ending Inventory Value = 20 * 900
= 18,000
(B). Change in Net Operating Income:
Sales = 9,700 * 200 = 19,40,000
Operating Expencess:
Variable Expences 9,700 * 76 = 7,37,200
Salaries = 1,08,000
Commission 9,700 * 12 = 1,16,400
Fixed Expencess = 10,38,000
Total = 19,96,600
Net Income = 19,40,000 - 19,99,600
= - 59,600
Change in Net Income
Sales 10,070 * 200 =20,14,000
Operating Expencess
Variable Exp 10,070 * 76 = 7,65,320
Salaries = 1,08,000
Commission 10,070 * 12 = 1,20,840
Fixed Expencess = 10,38,000
Total = 20,32,160
Net Operating Income 20,14,000 - 20,32,160
= - 18,160
Chages in Net Operating Income = (-) 59,600 - (-)18,160
= - 41,440
Variable Cost Per Unit = Total Variable Cost / Total Units ProducedRelated Questions
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