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1. Your marketing manager has developed three different compensation plans for your review. Which of these will be the most expensive? Which will be

1.   Your marketing manager has developed three different compensation plans for your review. Which of these will be the most expensive? Which will be the least expensive? Which plan would you adopt for your sales staff? Why?


a.     Plan A: Give each salesperson a salary of $40,000. Once a salesperson reaches a sales volume of $400,000 during the year, an incentive bonus of 8 percent of all sales made during the year will be awarded. No bonus will be awarded for annual sales volumes of under $400,000.


b.     Plan B: Give each salesperson a salary of $30,000 plus an 8 percent commission on all sales made during the year.


c.     Plan C: Give each salesperson a commission of 15 percent on the first $420,000 of sales made each year and 25 percent commission on all sales made over $420,000. Below are the forecasted sales for next year.


Salesperson                                                     Forecasted Sales for Next Year

Jagger                                                              $550,000

Costello                                                                          $520,000

Keith                                                                 $500,000

McCartney                                                      $475,000

Dylan                                                                $450,000

Timberlake                                                      $420,000

Clarkson                                                          $420,000

Lovett                                                              $400,000

Richards                                                           $400,000

Cash                                                                 $360,000

TOTAL                                                         $4,495,000

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