There are a variety of incentive schemes that can be implemented in order to help motivate and reward salespeople.

Part A: Calculate the total salary/incentive paid to George in each of the following

payment structures.

Part B: Which structure would be preferred by the salesperson? Which one the firm

would prefer? Is the same or a different scheme preferred?

Important Note: For all the incentive schemes below: George, the salesperson, sells 1,000

toasters in April and 2,000 toasters in May

Incentive Scheme One

Straight commission only

George gets paid $3 per toaster

Incentive Scheme Two

Straight commission but with a guaranteed salary

George gets paid $3 per toaster

But with a minimum salary of $4,000 per month

Incentive Scheme Three

Salary only

George gets paid a salary of $5,000pm

Which scheme would George probably prefer?

Which scheme would the firm probably prefer?

If different, is there another scheme more suitable to meeting the needs of both parties?