Question

In: Finance

Exerting the appropriate effort to make a sale versus shirking will cost a salesman the equivalent of $40 and will increase her sales effectiveness from 20% to 40%:

 

Exerting the appropriate effort to make a sale versus shirking will cost a salesman the equivalent of $40 and will increase her sales effectiveness from 20% to 40%:

a. You should offer a commission only if the contribution margin is greater than $200.

b. You should pay your sales force an hourly wage only if the contribution margin is greater than $200.

c. You should offer a commission only if the contribution margin is greater than $100.

d. You should pay your sales force an hourly wage only if the contribution margin is greater than $100.

Solutions

Expert Solution

Answer : Correct option is (a.) You should offer a commission only if the contribution margin is greater than $200.

Reason :

To give the commision of $ 40 it will be considered as viable only when the contribution margin is grater than $200 because By giving commion of 40 will increase effectiveness by 20% (40% - 20%) , which requires to have contribution magin of atleast 200 (40 / 0.20)

jeff jeffy answered 2 years ago
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