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Managers of Sunland Distributors are evaluating the compensation system for the company's sales personnel. Currently, the two salespeople have a combined salary of $54,600 per
Managers of Sunland Distributors are evaluating the compensation system for the company's sales personnel. Currently, the two salespeople have a combined salary of $54,600 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 $22,300 and increase the sales commission to 5%. The second alternative is to eliminate the salaries and pay a 25% sales commission. Sales projections under each of the compensation systems are as follows: Current system $ 923,000 Salary and 5% commission $ 1,146,000 25% commission $ 1,346,000 (a) Write the cost equations for the current compensation system and both alternative compensation structures. (Round percentages to 2 decimal places, e.g. 0.04. If the cost equation has no variable or fixed component, enter for the amounts.) Current system x sales) + $ Salary and 5% commission =( x sales) + $ 25% commission = ( x sales) + $ (b) Given Sunland's sales projections, and assuming that the cost of goods sold is equal to 30% of sales, which pay system would be the most profitable one for the company? Ignore all other costs. (Round percentages to 2 decimal places, e.g. 0.04 and final answers to O decimal places, 5,725.) Salary and 5% commission Current system 25% commission $ $ $ $ $ $ The most profitable pay system is
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