Data concerning Tietz Corporation\'s single product appear below: Per Unit $150

ID: 2535498 • Letter: D

Question

Data concerning Tietz Corporation's single product appear below: Per Unit $150 Percent of Sales 100% 2096 Selling price Variable expenses 30 Contribution margin $120 80% Fixed expenses are $1,053,000 per month. The company is currently selling 9,900 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 an overall decrease in their salaries of $101,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 490 units Required What should be the overall effect on the company's monthly net operating income of this change? (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.) Change in net operating income

Explanation / Answer

Change in net operating income = $66,290

9900 Units

10390 Units

Sales @150 per unit

$1485000

$1558500

Variable Costs

(9900 Units x $30)

($297000)

($405210)

(10390 Units x $39)

Contribution margin

$1188000

1153290

Fixed Costs

($1053000)

($952000)

Net operating income

$135000

$201290

Increase in net operating income: $201290 - $135000 = $66,290