Question

What is the profit impact if RBC: (1) pays a $15 sales commission per bike sold instead of paying salespersons flat salaries that currently total $6,000 per month, and (2) increases unit sales from 500 to 575 bikes?

Answer 1

To determine the profit impact, we need to consider the change in sales commission per bike sold and the change in unit sales. The profit impact can be calculated using the formula: Profit Impact = (Change in unit sales x Profit per unit sale) - Change in cost. Given that the profit per unit sale is not provided, we cannot calculate the exact profit impact.

Step-by-step explanation:

To determine the profit impact, we need to consider two changes: the change in sales commission per bike sold and the change in unit sales.

1. Change in sales commission: Currently, the total monthly flat salaries for salespersons are $6,000. If RBC pays a $15 sales commission per bike sold, we need to calculate the new monthly cost. Let's assume they sell the same number of bikes, which is 500. The new monthly cost would be $15 x 500 = $7,500. Therefore, the change in cost is $7,500 - $6,000 = $1,500.
2. Change in unit sales: The current unit sales are 500 bikes. If RBC increases unit sales to 575 bikes, the change in unit sales is 575 - 500 = 75 bikes.

To determine the overall profit impact, we need to consider the change in cost and the change in unit sales. The profit impact can be computed using the formula:

Profit Impact = (Change in unit sales x Profit per unit sale) - Change in cost

Given that the profit per unit sale is not provided in the question, we cannot calculate the exact profit impact. However, the formula can be used with the profit per unit sale value to determine the profit impact.