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:

Inadequate

Lacking the quality or quantity required; insufficient for a purpose.

Self-Serving Bias

The common tendency to attribute successes to personal characteristics and failures to external factors, often to maintain self-esteem.

Actor-Observer Effect

The tendency to make internal attributions for the behavior of others and external attributions for our own behavior.

External Attributions

The process of attributing the cause of one's own or others' behavior to external factors, such as the situation or other people, rather than to internal characteristics.