Data Concerning Hinkson Corporation's Single Product Appear Below: Fixed

question 137

Multiple Choice

Data concerning Hinkson Corporation's single product appear below: Fixed expenses are $720,000 per month. The company is currently selling 8,000 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 $9 per unit. In exchange, the sales staff would accept a decrease in their salaries of $60,000 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 $59,100
• B)decrease of $121,700
• C)increase of $894,300
• D)decrease of $1,700

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Definitions:

Ending Inventory Balance

Ending inventory balance is the total value of all the goods a company has in stock at the end of an accounting period.

Office Supplies

Consist of consumable items that are used in the daily operations of an office, such as paper, pens, and ink.

Physical Counts Of Inventory

The manual counting of all merchandise or stock in a business at a particular time to verify accuracy against recorded inventory levels.

Perpetual System

An inventory accounting system that records purchases and sales of goods instantly through computer systems, without periodically physically counting inventory.