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Truth Inducers Corporation has implemented the following bonus scheme for its regional sales managers. The mangers are paid 5% of the sales forecast and a

Truth Inducers Corporation has implemented the following bonus scheme for its regional sales managers. The mangers are paid 5% of the sales forecast and a 2% incremental pay for every $ of actual sales in excess of forecast whenever actual sales exceed forecast. However, if actual sales fall below the forecast, the total payment is 5% of the sales forecast minus 7% of the amount by which sales fall below forecast. Under the above scheme, a sales manager, who has private knowledge of expected sales of $11,000, can expect to make a bonus of

$480 when she makes a forecast of $11,000

$520 when she makes a forecast of $10,000

$430 when she makes a forecast of $11,000

$500 when she makes a forecast of $10,000

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