Currently the sales clerks receive a salary of $7,000 per month in Store B. A proposal has been made to change from a fixed salary to a sales commission of 5%. Assume that this proposal is adopted, and that as a result sales increase by $20,000. The new segment margin for Store B should be:
A)$29,000
B)$32,000
C)$39,000
D)$45,000

Question

Quizplus · Accepted Answer

The new segment margin is the difference between the sales revenue and the cost of goods sold. The cost of goods sold is not given, so we cannot calculate the exact segment margin. However, we can calculate the change in segment margin. The change in segment margin is equal to the change in sales revenue minus the change in cost of goods sold. The change in sales revenue is $20,000. The change in cost of goods sold is not given, but we can assume that it is proportional to the change in sales revenue. Therefore, the change in cost of goods sold is $20,000 * 5% = $1,000. The change in segment margin is $20,000 - $1,000 = $19,000. The new segment margin is the old segment margin plus the change in segment margin. The old segment margin is not given, but we can assume that it is equal to the old sales revenue minus the old cost of goods sold. The old sales revenue is $7,000 * 12 = $84,000. The old cost of goods sold is not given, but we can assume that it is equal to 80% of the old sales revenue. Therefore, the old cost of goods sold is $84,000 * 80% = $67,200. The old segment margin is $84,000 - $67,200 = $16,800. The new segment margin is $16,800 + $19,000 = $35,800. The closest answer choice is A) $29,000.

Currently the Sales Clerks Receive a Salary of $7,000 Per