Question

Under which of the following compensation systems is the agency compensation tied to performance?

A.Fixed-fee system
B.Incentive-based system
C.Cost-plus system
D.Negotiated commission system
E.Straight-fee system

Answer 1

Agency compensation is tied to performance in the Incentive-based system. This system rewards agencies based on the results they achieve, such as an increase in a client's sales. The correct option is B.

Step-by-step explanation:

The compensation system where the agency compensation is tied to performance is the Incentive-based system. Under this system, payments or rewards are directly related to the performance or results achieved by the agency.

For example, an advertising agency might receive a bonus for a campaign that leads to a certain percentage increase in the client's sales.

This contrasts with systems such as the fixed fee or straight fee, where the payment is predetermined and not directly linked to the performance outcomes.