Question

Would commission based compensation, where an employee is paid a commission on her total sales, give...

Would commission based compensation, where an employee is paid a commission on her total sales, give an incentive to the employee to control costs? Please give an explanation.

Homework Answers

Answer #1

Answer: The commission paid on performance basis to the employee is a cost for the company. The employee would always under this mechanism of commission-based compensation try to do more and more sales during each working cycle in order to increase her pay, which would in turn lead to an increase in costs for the company as well. The sole objective of the employee is to maximize sales done by her and hence, she would not be having any incentive to control costs rather she would only be interested in maximizing sales in every possible way.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Jesse Daniels is a commission-based employee who is single with one withholding allowance. She is paid...
Jesse Daniels is a commission-based employee who is single with one withholding allowance. She is paid $7.00/hour and receives a 5 percent commission on net sales. She does not receive commissions until her net sales exceed $58,000 during a weekly period at Perous Pharmaceuticals. For the week ending May 5, 20XX, she worked 48 hours and sold $70,000 of medicinals but had $1,400 of returns from last week’s sales. Company policy requires that commissions on returned sales be deducted from...
Nancy is employed by a large corporation as a sales representative. She is paid a salary...
Nancy is employed by a large corporation as a sales representative. She is paid a salary of $70,000 during 2020. She is required to have a home office and uses the 375 square foot den in her 1,500 square foot house exclusively for this purpose. Total costs for 2020 were as follows: Mortgage payments (40% principal, 60% interest): $24,000 Home owner's insurance: $900 Utilities: $1,500 Roof repair: $800 Property tax: $5,000 Currently, Nancy’s compensation does not include any commissions. As...
Managers of Crane Distributors are evaluating the compensation system for the company’s sales personnel. Currently, the...
Managers of Crane Distributors are evaluating the compensation system for the company’s sales personnel. Currently, the two salespeople have a combined salary of $60,246 per year and earn a 3% sales commission. The company is considering two alternatives to the current compensation system. The first alternative is to reduce total salaries to $50,246 and increase the sales commission to 5%. The second alternative is to eliminate the salaries and pay a 12% sales commission. Sales projections under each of the...
Forge, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently,...
Forge, Inc. is trying to decide whether to increase the commission-based pay of its salespeople. Currently, each of its ten salespeople earns a 10% commission on the units they sell for $200 each, plus a fixed salary of $37,000 each. Forge hopes that by increasing commissions to 20% and decreasing each salesperson’s salary to $27,000, sales will increase because salespeople will be more motivated. Currently, sales are 12,000 units. Forge’s other fixed costs, NOT including the salespeople’s salaries, total $168,000....
Give an example where radio based RTK positioning would be preferred.
Give an example where radio based RTK positioning would be preferred.
Agree or desagree. Please give comments. Paid time off benefits are compensation employees receive when they...
Agree or desagree. Please give comments. Paid time off benefits are compensation employees receive when they are not actively working (Martocchio, 2014). I feel that a flexible work schedule is critical to recruit the best employees. Flexible scheduling allows employees to alter their workday start and finish times in order to help balance their work and family responsibilities. This schedule is especially beneficial to single parents, who need to care for their children in addition to working. Life doesn’t always...
Based on a predicted level of production and sales of 16,000 units, a company anticipates total...
Based on a predicted level of production and sales of 16,000 units, a company anticipates total variable costs of $78,400, fixed costs of $27,200, and operating income of $94,080. Based on this information, the budgeted amount of operating income for 13,000 units would be: Multiple Choice $7,060. $98,540. $162,240. $71,340. $63,700.
Read Case #1 entitled “Understanding Your Employee Benefits: Executive Compensation in a Corporation” on page 308...
Read Case #1 entitled “Understanding Your Employee Benefits: Executive Compensation in a Corporation” on page 308 in your text and answer these case questions: What is the purpose of the platinum parachute? Why would the company provide this benefit? How does it compare to the golden parachute? Why does the company offer an incentive stock option plan? What other protections are in place for the shareholders and employees relative to executive compensation in organizations? After 15 years working at a...
With which type of gain sharing plan bases employee bonuses on the difference between the number...
With which type of gain sharing plan bases employee bonuses on the difference between the number of labour hours a firm should have used with the number of labour hours actually used during a specific period? Lincoln Rucker Improshare Scanlon In Vroom’s Theory of Motivation, motivation is equal to E * I*V, where I represents: intrinsic needs internalization instrumentality imperative action Sharon is a sales clerk at Bay view motors. She typically works 40 hours per week and her pay...
Based on a predicted level of production and sales of 21,000 units, a company anticipates total...
Based on a predicted level of production and sales of 21,000 units, a company anticipates total contribution margin of $56,700, fixed costs of $21,000, and operating income of $35,700. Based on this information, the budgeted operating income for 19,000 units would be: Multiple Choice $35,700. $77,700. $30,300. $39,789. $56,700.