Question

As a new sales employee you are given two salary structures to choose from. The

first option has a base salary of $1400 per month plus a 6% commission (bonus) on
sales made. The second option has a base salary of $1100 per month plus an 8%
commission on the sales made.
Let z represent the sales amount and let y represent the monthly income.

Answer 1

The indifference point between the two options is $15,000 in sales.

Explanation:

To determine the indifference point, first, we need to use structure the monthly income formula for each option:

Option 1:

y= 1,400 + 0.06z

Option 2:

y= 1,100 + 0.08z

Now, we equal both formulas and isolate z:

1,400 + 0.06z= 1,100 + 0.08z

300= 0.02z

$15,000= z

The indifference point between the two options is $15,000 in sales.