Moallankamp Corporation Produces and Sells a Single Product

question 183

Essay

Moallankamp Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $1,131,000 per month. The company is currently selling 7,000 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 $20 per unit. In exchange, the sales staff would accept an overall decrease in their salaries of $117,000 per month. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 400 units. What should be the overall effect on the company's monthly net operating income of this change? Show your work!

---

Definitions:

Personality

The mix of traits or attributes that create a person's unique personality.

Hierarchy of Needs

A theory proposed by Abraham Maslow outlining a sequence of human needs from basic physiological requirements to self-actualization.

Reality Principle

The psychological concept that represents the ability of the mind to assess the external world and act upon it accordingly, as opposed to acting on the pleasure principle.

Erogenous Zones

Areas of the body especially sensitive to sexual stimulation.