Business, 19.02.2020 23:05, brittanyowusu1820
Rather than purchase new equipment, the marketing manager argues that the company's marketing strategy should be changed. Rather than pay sales commissions, which are currently included in variable expenses, the company would pay salespersons fixed salaries and would invest heavily in advertising. The marketing manager claims this new approach would increase unit sales by 50% without any change in selling price; the company's new monthly fixed expenses would be $331,200, and its net operating income would increase by 25%.
Compute the break-even point in dollar sales for the company under the new marketing strategy.
Morton Company's contribution format income statement for last month is given below:
Sales (46,000 units * $24 per unit) $1,104,000
Variable expenses $772,800
Contribution margin $331,200
Fixed expenses $264,960
Net operating income $66,240
Answers: 1
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