Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 6% commission on the units they sell for $100 each, plus a fixed salary of $41,200 per person. Glade hopes that by increasing commissions to 11% and decreasing each salesperson’s salary to $21,200, sales will increase because salespeople will be more motivated. Currently, sales are 20,000 units. Glade’s other fixed costs, NOT including the salespeople’s salaries, total $580,000. Glade’s other variable costs, NOT including commissions, total $18 per unit.

a. What is the current profit?

b. What is the current break-even point in units?

c. What would the break-even point in units be if commissions are increased and salaries decreased?

d. If sales increase by 14,000 units, what will profit be under the new plan?

e. At what sales level would Glade be indifferent between the lower-commission plan and the higher-commission plan?

Answer rating: 100% (QA)

a Calculation of current profits particulars sales 20000 units 100 2000000 variable cost excluding salespeoples commission 20000 units 18 360000 sales... View the full answer