Figure 17-6 Figure 17-6 Shows Two Different Compensation Schemes for the Vortex

question 108

Multiple Choice

Figure 17-6

Figure 17-6 shows two different compensation schemes for the Vortex Vacuum Cleaner Company.
Under Scheme I, the firm pays a consistent wage of $2,500 per month to all its salespeople for sales up to 20 vacuum cleaners. For sales of 21-30 vacuum cleaners, its salespeople earn $125 per vacuum cleaner, with wages capped at $3,750 per month for sales over 30 vacuum cleaners. If a salesperson has three consecutive months of sales below 20 vacuum cleaners, the person loses his or her job.
Scheme II represents a straight commission, with salespeople earning a commission of $125 per vacuum cleaner sold, with no wage cap.
-Refer to Figure 17-6.Which of the following statements about Scheme II is false?

• A)It is likely to draw highly productive workers who see the opportunity to increase their wages.
• B)It could discourage less productive workers and induce them to leave the firm.
• C)It allows workers to increase their monthly wage without penalizing those who are content with their monthly wage.
• D)It is more risky for senior employees.

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Definitions:

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