Question
Farah, the owner of a used car dealership, is working on compensation plans for her employees. She is trying to evaluate how a commission-based versus
Farah, the owner of a used car dealership, is working on compensation plans for her employees. She is trying to evaluate how a commission-based versus salary-based workforce would affect her bottom line. In considering her options, she finds basic financial information of two companies with similar year-end performance but different compensation plansperfect examples to help her with her evaluation! Company X uses a commission-based approach, where its sales staff operates exclusively on commission. Company Y, on the other hand, pays its sales staff a flat salary with no commission. Here are the basics for each company. Company X Company Y Current sales volume 10,000 units 10,000 units Selling price $50 $50 Variable cost per unit $20 $10 Fixed costs $100,000 $200,000 Required
A. Utilizing the DOL from part (a), calculate the percentage and dollar amount by which income will increase for each company if they both increase their sales by 30%
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