Thornbrough Corporation produces and sells a single product with the following characteristics: Per UnitPercent of SalesSelling price$220 100%Variable expenses 44 20%Contribution margin$176 80% The company is currently selling 7,000 units per month. Fixed expenses are $901,000 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 $11 per unit. In exchange, the sales staff would accept a decrease in their salaries of $65,000 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 300 units. What should be the overall effect on the company's monthly net
operating income of this change?
A. decrease of $92,500
B. increase of $37,500
C. increase of $61,700
D. increase of $1,269,500
Answer: B
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