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

question 276

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.Salespeople would be indifferent to the two pay schemes if their monthly sales were

• A)less than 20 vacuum cleaners.
• B)between 20 and 30 vacuum cleaners.
• C)between 30 and 45 vacuum cleaners.
• D)more than 45 vacuum cleaners.

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Definitions:

Notice

A formal declaration or statement that informs parties of certain facts, obligations, or legal processes.

Partnership Firm

A business entity created when two or more individuals agree to share the profits and losses of a business venture.

Indemnified

Protected against loss, damage, or legal liability through a legal agreement or insurance.

Expenditures

Money spent or costs incurred in the course of conducting business or achieving a project.