Reference no: EM13918897
Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 5% commission on the units they sell for $100 each, plus a fixed salary of $41,800. Glade hopes that by increasing commissions to 10% and decreasing each salesperson's salary to $21,500, sales will increase because salespeople will be more motivated. Currently, sales are 19,000 units. Glade's other fixed costs, NOT including the salespeople's salaries, total $585,000. Glade's other variable costs, NOT including commissions, total $12 per unit.
a. What is the current profit?
b. What is the 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 8,000 units, what will the 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?
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