Question $2($Total $20$ marks$)$

Galaxy Corporation operates with a single prodoct with the following financial data about its sales and costs. Assume that Galexy's coves are either fixed or variable:

$\backslash$table$[[,$Toul$],[$Salcs $(88,8,000$ units$),$$$1,360,000],[$Dirsect material,$200,000],[$Direct Labour,$120,000],[$Variable overtheads,$40,000],[$Depreciation expense$-$ Building,$100,000],[$Sales salary expense,$160,000],[$Administrative expense,$240,000],[$Fixed manufacturing overhesads,$253,000],[$Delivery expense,$40,000],[$Warranty expense,$8\mathrm{.}000]]$

In a mecting on business strategy, the narketing manager introduced sales commissions as an incentive for the sales staff. He proposed a coenmission of $$11$ per unit. As an exchange, the staff of the selling team would accept an overall decrease in their salaries, totalling $$73,000$ per month. The marketing manager predicted that this new sales incentive would increase monthly sales by $300$ units.

Required:

What should be the overall effect on the oompany's monthly act operating income under this policy? Use the contribetios margin approach and show your computations.

$(10$ marks$)$

Calculate the degree of operation leverage before and afler the policy change. $(5$ marks$)$

Discuss the implications of the change in the degree of operation leverage before and after the policy.

$(5$ marks$)$