Question

A salesperson can use regular levels of effort to make a sale (30% chance of success), or they can make a stronger effort and increase their chances of success to 60%. The extra effort costs $60 more than the regular effort for the salesperson. How much should salesperson's employer provide as a bonus to assure strong sales effort? A. $60 B. $120 C. $200 D. $300

Answer 1

Answer: $200

Explanation: In the given case, the employer should provide bonus in such a way that the extra cost of $60 incurred gets covered, otherwise, it will result as a loss and wastage of efforts. Now, the coverage amount from given options can be explained as follows :-

A. coverage = (60% * $60) - 60 = -$24 loss

B. coverage = (60% * 120) - 60 = $12

C. coverage = (60% * 200) - 60 = $60

D. coverage = (60% * 300) - 60 = $120

Thus, option C is correct as in case of option D the coverage amount is exceeding extra cost.