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

question 156

Multiple Choice

Data concerning Knipp Corporation's single product appear below: Fixed expenses are $587,000 per month. The company is currently selling 4,000 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 $16 per unit. In exchange, the sales staff would accept a decrease in their salaries of $57,000 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 $55,400
• B)increase of $745,800
• C)increase of $9,800
• D)decrease of $104,200

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Definitions:

Net Sales

The revenue from sales transactions after subtracting returns, allowances for damaged or missing goods, and discounts.

Average Inventory

Calculated by adding the value of the inventory at the beginning and end of a period and dividing by two, reflecting an average amount of inventory held over the period.

Semiannually

Happening biannually or once every six months.

Ending Inventory

The total value of all the goods remaining unsold at the end of an accounting period.