A Recently Opened Car Dealership Uses an Incentive Compensation Plan

question 5

Multiple Choice

A recently opened car dealership uses an incentive compensation plan for its sales people.The dealer provides money to its salespeople to cover basic living expenses and then shares a fixed percentage of the selling price of each car sold.However,the salesperson should repay the subsistence pay component within a year;otherwise he/she cannot continue in the employment of this dealer.Which type of sales compensation plan does this dealer adopt?

• A)salary-plus-bonus
• B)salary-plus-commission
• C)commission-plus-draw
• D)commission only

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Definitions:

Total Tax

The cumulative amount of taxes an individual or entity is required to pay, including federal, state, local, and other applicable taxes.

Net New Borrowing

Net New Borrowing refers to the amount of new borrowing a company takes on, minus any loan repayments, indicating the net increase in its debt level.

Net Working Capital

The gap between what a firm owns in the form of current assets and what it owes as current liabilities, reflecting its ability to cover short-term expenses.

Statement of Financial Position

Also known as a balance sheet, it is a financial statement that shows the assets, liabilities, and equity of a company at a specific point in time, illustrating the company's financial condition.