Question

Parker Company pays each member of its sales staff a salary as well as a commission on

each unit sold. For the coming year, Parker plans to increase all salaries by 5% and to keep
unchanged the commission paid on each unit sold. Because of increased demand, Parker
expects the volume of sales to increase by 10%. How will the total cost of sales salaries and
commissions change for the coming year?
A. Increase by 5% or less.
B. Increase by more than 5% but less than 10%.

Answer 1

Answer: B is correct

Step-by-step explanation:

Sales salaries will increase by exactly 5%. The per-unit commission amount will remain constant, but sales commissions in total are expected to increase by 10%. Thus, total sales salaries and commissions will increase somewhere between 5% and 10%.