Which of the Following Statements About Straight Commission Compensation Plans

question 33

Multiple Choice

Which of the following statements about straight commission compensation plans is true?

• A) Compensation cost per unit is always lower under a straight commission plan
• B) Many firms, especially those engaged in relationship selling have abandoned straight commission plans
• C) Straight commission plans increase management's control over the sales force
• D) Companies operating with straight commission plans tend to have lower turnover rates when business conditions are poor than do companies with a straight salary plan
• E) Firms that are short on working capital should never use the straight commission plan

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Definitions:

Regular Time Cost

The cost associated with employees' wages during their standard working hours, excluding overtime compensation.

Over Time Cost

The additional expenses incurred due to operations extending beyond the normal working hours, including but not limited to wages for overtime work.

Marginal Subcontracting Cost

The increased cost associated with subcontracting an extra unit of production or service.

Layoff Cost

Expenses associated with reducing the workforce, including severance pay, benefits continuation, and related administrative costs.