Hartung Corporation Produces and Sells a Single Product

question 80

Multiple Choice

Hartung Corporation produces and sells a single product. Data concerning that product appear below: Fixed expenses are $147,000 per month. The company is currently selling 2,000 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 $13 per unit. In exchange, the sales staff would accept a decrease in their salaries of $22,000 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 400 units. What should be the overall effect on the company's monthly net operating income of this change?

• A)increase of $16,800
• B)increase of $226,000
• C)increase of $30,000
• D)decrease of $14,000

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Definitions:

Interest

The price paid for acquiring funds, often quoted as a yearly rate of the total amount borrowed.

Savings Account

A deposit account held at a financial institution that provides principal security and a modest interest rate.

Interest Compounded

Interest compounded refers to the process where interest earned on an investment is reinvested to earn additional interest, leading to exponential growth in the investment's value.

Lump Sum

A one-time transaction occurring at a specific moment, rather than several installments spread out.