sales representatives receive an 8% commission on each sale. The December income statement shows the following information:
Sales $1,200,000-
Cost of goods sold $640,000 =
Gross profit $560,000
Expenses:
Sales commissions $96,000 +
Advertising160,000+
Store rent24,000+
Administrative salaries40,000+
Amortization50,000+
Other12,000=
Total382,000
Net income178,000
The company's management believes that the December results would be repeated during January, February, and March without any changes in strategy. However, some changes are being considered. Management believes that unit sales will increase at a rate of 10% each month during the next quarter (including January) if the item's selling price is reduced to $112 per unit and if advertising expenses are increased by 25% and remain at that level for all three months. Even if these changes are made, the purchase price will remain at $64 per unit. Under this plan, the sales representatives would continue to earn a 8%
2007-09-03
04:23:15
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1 answers
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asked by
w_damara2002
2
in
Other - Business & Finance