Management is considering a change in the sales force compensation plan. Currently each of the firm's...

Management is considering a change in the sales force compensation plan. Currently each of the firm's two salespeople is paid a salary of $2,500 per month.

g-1. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.85 per unit, assuming a sales volume of 5,050 units per month. (Do not round intermediate calculations.)

g-2. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of $400 per month, plus a commission of $0.85 per unit, assuming a sales volume of 6,450 units per month. (Do not round intermediate calculations. Losses should be indicated by a minus sign.)

h-1. Assuming that the sales volume of 6,450 units per month achieved in part g could also be achieved by increasing advertising by $1,000 per month instead of changing the sales force compensation plan. What would be the operating income or loss? (Do not round intermediate calculations. Losses should be indicated by a minus sign.)

h-2. Which strategy would you recommend?

	Plan to change the sales force compensation.
	Plan to increase advertising expenses.

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Expert Solution

ekkarill92 answered 11 months ago

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