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:

Before-Tax Distribution

Refers to the allocation of income among individuals or entities before accounting for taxes.

Personal Income Tax

a tax levied on individuals or households based on their total annual income, with the tax rate typically increasing as income increases.

Sales And Excise Taxes

Taxes imposed on the sale of goods and services (sales tax) and specific goods like gasoline, cigarettes, and alcohol (excise taxes), typically used to generate revenue for governments.

Commodity Taxes

Taxes imposed on goods, often based on their value or quantity, used by governments to generate revenue or influence market prices.