Question
Question #5 As a general manager of Cortez Enterprises (CE), you are studying the addition of a new product that would have an expected selling
Question #5
As a general manager of Cortez Enterprises (CE), you are studying the addition of a new product that would have an expected selling price of $180 and expected variable cost of $120. A new salesperson must be hired because the company's current sales force is working at capacity. Two compensation plans are under consideration: Plan 1: An annual salary of $38,000 plus 10% commission based on gross sales dollars Plan 2: An annual salary of $180,000 and no commission Required:
- Which of the two plans is more risky? Why?
- At what level of sales would you be indifferent between the two plans? Which method would you prefer before and after this point?
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Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
13th Edition
978-0697789938
