Houpe Corporation Produces and Sells a Single Product

question 188

Multiple Choice

Houpe Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $490,000 per month. The company is currently selling 6,000 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 $11 per unit. In exchange, the sales staff would accept a decrease in their salaries of $58,000 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 100 units. What should be the overall effect on the company's monthly net operating income of this change?

• A) increase of $700
• B) increase of $56,900
• C) decrease of $115,300
• D) increase of $588,700

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Definitions:

Pancreas

An organ in the abdominal cavity that plays a crucial role in digestion and the regulation of blood sugar by producing enzymes and hormones like insulin and glucagon.

Esophagus

A muscular tube that connects the throat to the stomach, transporting swallowed food and liquids.

Throat

The anterior part of the neck, housing the pharynx and vocal cords, and leading to the esophagus and larynx.

Pharynx

The muscular tube that connects the mouth and nasal passages with the esophagus and larynx, serving both respiratory and digestive functions.