Question

Choose the method of pay that would result in the most earnings for one month on sales of $60,000. a. Straight commission of 6% on all sales. b. Monthly salary of $1,500 plus 3% commission on all sales. c. Graduated commission of 4% on the first $50,000 in sales and 10% on anything over that. d. Graduated commission of 5% on the first $40,000 in sales and 9% on anything over that.

Answer 1

d

Explanation:

Answer 2

d. Graduated commission of 5% on the first $40,000 in sales and 9% on anything over that.

Explanation:

The attached graph shows the commission curves for the four options. For very high amounts of sales, the 10% rate (option c) will be the best, but sales must be above $140,000 for that to be the case. In the range of interest, the 9% rate (option d) is the best.

Here are the commission calculations on $60,000 for each of the options.

a. 6% of $60,000 = $3600

b. $1500 +3% of $60,000 = $1500 +1800 = $3300

c. 4% of $50,000 + 10% of $10,000 = $2000 +1000 = $3000

d. 5% of $40,000 + 9% 0f $20,000 = $2000 +1800 = $3800 . . . . best choice