The Parsons Co. compensates its field sales force on a commission and year-end bonus basis. The commission is \(20 \%\) of standard gross margin (planned selling price less standard cost of goods sold on a full absorption basis) contingent upon collection of the account. Customer's credit is approved by the company's credit department. Price concessions are granted on occasion by the top sales management, but sales commissions are not reduced by the discount. A year-end bonus of \(15 \%\) of commissions earned is paid to salesmen who equal or exceed their annual sales target. The annual sales target is usually established by applying approximately a \(5 \%\) increase to the prior year's sales.

Required:

(a) What features of this compensation plan would seem to be effective in motivating the salesmen to accomplish company goals of higher profits and return on investment? Explain why.

(b) What features of this compensation plan would seem to be counter effective in motivating the salesmen to accomplish the company goals of higher profits and return on investment? Explain why.