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Which of the following is true of a straight commission compensation method?

A. It is unaffected by the results actually achieved by a salesperson.
B. It offers the most security for a salesperson.
C. It increases the need for working capital.
D. It can only be based on a percentage of dollar sales.
E. It reduces the amount of sales supervision needed.

1 Answer

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Final answer:

The true statement about a straight commission compensation method is that it increases the need for working capital, as it is a variable pay structure depending on the salesperson's performance.

Step-by-step explanation:

The correct answer to the question "Which of the following is true of a straight commission compensation method?" is that it increases the need for working capital. Straight commission is a compensation method where a salesperson is paid based on the sales they generate, rather than receiving a fixed salary. Because the salesperson's income is directly tied to their sales performance, a straight commission structure can motivate them to work harder and sell more. However, it does not inherently provide the most security for a salesperson, as their income can vary greatly depending on their sales success. It can also be based on different metrics, not just a percentage of dollar sales - such as the volume of units sold or specific types of products, thereby making option D incorrect. Option E is also incorrect as depending on the nature of the business, the amount of sales supervision required may not necessarily be reduced; effective management and oversight are still critical in a commission-based environment.

User Levent Ozbek
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