Data Concerning Sa Corporation's Single Product Appear Below

question 170

Multiple Choice

Data concerning Sa Corporation's single product appear below:
Fixed expenses are $445,000 per month. The company is currently selling 6,000 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 $43,000 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) decrease of $88,900
• B) decrease of $2,900
• C) increase of $42,100
• D) increase of $537,100

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Definitions:

Equity Theory

A theory of motivation that focuses on individuals' perceptions of fairness in the distribution of rewards and efforts in their relationships or work environments.

Corporate Downsizing

The planned reduction of a company's workforce to improve efficiency or reduce costs, often impacting morale and productivity.

Younger Generation

Refers to the current cohort of individuals who are at a relatively early stage of life, often characterized by their adaptability to technology and progressive views.

Equity Sensitivity

An individual’s preference for fairness and equity in their interactions and distributions of resources with others.