Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople....
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Glade, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its five salespeople earns a 6% commission on the units they sell for $100 each, plus a fixed salary of $41,200 per person. Glade hopes that by increasing commissions to 11% and decreasing each salespersons salary to $21,200, sales will increase because salespeople will be more motivated. Currently, sales are 20,000 units. Glades other fixed costs, NOT including the salespeoples salaries, total $580,000. Glades other variable costs, NOT including commissions, total $18 per unit.
a. What is the current profit?
b. What is the current break-even point in units? (Round your answer to the nearest whole number.) c. What would the break-even point in units be if commissions are increased and salaries decreased? (Round your answer to the nearest whole number.) d. If sales increase by 14,000 units, what will 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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