Answer:
The profit impact if walmart pays a $10 sales commission per bike sold instead of paying sales persons flat slalaries that currently total $5000 per month (not included in the current fixed cost) is $15,400.
Explanation:
Current Situation Proposed Situation
No. of Bikes sold 400 bikes 460 bikes
Sales price per unit $750 $750
Total Sales $300,000 $345,000
Variable cost(400*$500)(460*$500) ($200,000) ($230,000)
Contribution Margin $100,000 $115,000
Salaries ($5,000) (0)
Sales commission(460 bikes*$10) (0) ($4,600)
Net operating income $95,000 $110,400
Net Increase in Net operating income = $110,400 - $95,000
= $15,400
Therefore, The profit impact if walmart pays a $10 sales commission per bike sold instead of paying sales persons flat slalaries that currently total $5000 per month (not included in the current fixed cost) is $15,400.
