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Scorpion, Inc. is trying to decide whether to increase the commission based pay of its salespeople. Currently, each of its five salespeople earns a 15% commission on the units they sell for 100$ each, plus a fixed salary of 40,000$. Scorpion hopes that by increasing commission to 20% and decreasing each salespersons salary to 25,000$, sales will increase because salespeople will be more motivated. Currently, sales are 13,000 units. Scorpion's other fixed costs, NOT including the salespeople's salaries, total 580,000$. Scorpions other variable costs, NOT including commissions, total 20$ per unit.

A. What is current profit?

B. What is the current break even point in units

C. What would the break even point in units be if commissions are increased and salaries decerased?

D. If sales increase by 4,000 units, what will profit be under the new plan?

E. At what sales level would scorpion be indifferent between the lower commission plan and the higher commission plan?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9798756

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