North-eastern Plc Ltd. produces and sells a single product for $120, and incurs variable costs per unit totaling 45% of the sales price. North-eastern currently sells 5,700 units each month and has fixed costs of $257,000 per month. Consider each of the following separately:
Part A
The marketing manager thinks sales are too low in St. Kitts and Nevis and suggests that sales there would be increased by 150 units per month if an additional $6,000 per month was spent advertising there. What should be the effect on monthly income if this additional advertising is done? Answer 1 Question 30 Increase by $3,900Increase by $2,100Increase by $2,187Increase by $309,900
Part B
The marketing manager believes that sales staff could sell as additional 350 units of product each month if properly motivated, and is considering cutting their collective monthly salaries by $50,000 while giving them a $7 commission on each unit sold. What effect should this strategy have on monthly income? Answer 2 Question 30 IncreaseDecrease of $Answer 3 Question 30.
Part C
Management believes monthly sales can be increased by 760 units if additional quality control steps are taken. These steps would mean an increased variable cost per unit of $5. What is the expected effect on the company's monthly income of adding these additional quality control steps? Answer 4 Question 30 Increase by $17,860Increase by $50,160Increase by $46,360Increase by $37,240