Elegant Electronics compensates its salesmen according to the following scheme. A salesman's remuneration comprises three components: (a)
Question:
Elegant Electronics compensates its salesmen according to the following scheme. A salesman's remuneration comprises three components:
(a) a basic salary of f200 per month,
(b) a sales commission amounting to 1% of gross sales, and
(c) a bonus amounting to 5% of all gross sales made in excess of a budget target.
The budget target was initially set in July at f40000 for all salesmen, but is revised monthly on the basis of actual sales made in the previous month plus a 10% increase.
On reviewing the scheme after 6 months' operation it is noticed that two salesmen selling the same products in different areas have the following sales records:
(a) Calculate the total remuneration for Simon Smooth and for Percival Plodder.
(b) Evaluate the compensation system, and suggest any changes you would recommend to improve it.
From: Certified Diploma in Accounting and Finance, Paper 2, Pilot papers 1980.
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