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11 June, 06:07

During a year, Mark's monthly sales compensation ranged between $15,500 and $20,900 per month and units sold ranged between 1,100 and 1,900 units for those same months. Required: Use the high-low method to determine Mark's monthly salary and commission rate per unit sold and then calculate the total number of units sold in a year when Mark's total compensation amounted to $184,650. (Round your "Commission rate" to 2 decimal places.)

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  1. 11 June, 06:27
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    13,000 units.

    Explanation:

    High-Low level method formula:

    Variable Cost per unit = (Y2 - Y1) : (X2 - X1)

    y2 is the total cost at highest level of activity;

    y1 is the total cost at lowest level of activity;

    x2 are the number of units/labor hours etc. at highest level of activity; and

    x1 are the number of units/labor hours etc. at lowest level of activity

    = ($20,900 - $15,500) : (1900 - 1100)

    = $6.75 per unit.

    Mark's monthly Salary = Total Compensation - Sales commission

    = $20,900 - 1900 * $6.75

    = $8,075

    Calculation of the total number of units sold in a year when Mark's total compensation amounted to $184,650:

    Sales Commission earned by Mark:

    = Total Compensation - Mark's yearly Salary

    = $184,650 - ($8,075 * 12)

    = $87,750

    Calculation of total number of units sold in a year:

    = Sales Commission earned during the year : Sales Commission per unit

    = 87,750 : $6.75

    = 13,000 units.
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