Data concerning Wislocki Corporation's single product appear below: Per UnitPercent of SalesSelling price$130 100%Variable expenses 26 20%Contribution margin$104 80% Fixed expenses are $466,000 per month. The company is currently selling 6,000 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 $11 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 100 units. What should be the overall effect on the company's monthly net operating income of this change?
What will be an ideal response?
| New contribution margin ($104 per unit - $11 per unit) | $ | 93 | |
| New unit monthly sales (6,000 units + 100 units) | 6,100 | ||
| New total contribution margin: 6,100 units × $93 per unit | $ | 567,300 | |
| Present total contribution margin: 6,000 units × $104 per unit | 624,000 | ||
| Change in total contribution margin | (56,700 | ) | |
| Plus savings in salespersons' salaries | 55,000 | ||
| Change in net operating income | $ | (1,700 | ) |
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