Question 1

Money paid to a straight commission salesperson against future earnings,which guarantees a stable cash flow,is called a:

Accepted Answer

A draw is a form of advanced payment to a commission salesperson against expected future earnings. It ensures that the salesperson has a stable cash flow, even if their sales are inconsistent. It is usually deducted from future commissions earned.

Question 2

Marshall is compensated by his company under a straight commission plan.He receives 10 percent of the total sales revenue per week.In a particular week,the total sales revenue is $6,000.This amount is known as the:

Accepted Answer

The amount of sales revenue that Marshall receives his commission from is known as the commission base. In this case, the commission base is $6,000.

Question 3

Which of the following is a major disadvantage associated with a combination compensation plan?

Accepted Answer

The major disadvantage associated with a combination compensation plan is its complexity. A combination plan combines two or more compensation plans, each with its own advantages and disadvantages, resulting in a more complex and potentially difficult plan to administer.

Question 4

Jill is newly appointed as a salesperson with Fleurs Perfumes.For every case of fragrance that Jill sells,she earns $10.Identify this extra payment that Jill receives for every case of fragrance.

Accepted Answer

Jill earns a commission for every case of fragrance she sells. A commission is a percentage or flat rate payment based on sales or transactions. In this case, Jill earns $10 for every case of fragrance she sells, which qualifies as a commission.

Question 5

Which of the following is an advantage of a straight commission plan?

Accepted Answer

A straight commission plan ties a salesperson's compensation directly to his or her performance, providing a strong incentive to work hard and sell more. Nonfinancial kickbacks or perks are not part of this plan, and activities that do not directly lead to sales are discouraged. Loyalty and willingness to monitor customer service programs may vary among salespeople on straight commission, and are not necessarily advantages exclusive to this type of plan.

Question 6

Chris receives $520 per week of gross pay in his sales job at Lark Dealership.This amount remains fixed and does not vary with the number of sales.As long as Chris works his 40 hours,he gets paid $520.Chris is paid:

Accepted Answer

Chris receives a fixed amount of pay per week, regardless of the number of sales he makes. This type of pay is called a salary, therefore the best choice is E, a straight salary.

Question 7

A(n)_____ is incentive pay for overall performance in one or more areas.

Accepted Answer

A bonus is incentive pay given for overall performance in one or more areas. It is typically a one-time payment and not a part of the regular salary or wages of an employee. The other options are not relevant to the given description.

Question 8

A _____ plan typically pays a certain amount per sale,and the plan includes a base and a rate but does not include a salary.

Accepted Answer

A straight commission plan pays a certain amount per sale and does not include a salary or base pay. The salesperson's income is entirely based on their ability to make sales.

Question 9

Harry is a sales representative working for a pharmaceutical company.He achieved 130 percent of his annual sales target for the current financial year.To reward him for his excellent performance,his company made an extra payment as _____.

Accepted Answer

Harry's extra payment for achieving 130 percent of his sales target is most likely a commission, which is a payment made to a salesperson as a percentage of the sales they generate. The other answer choices (push money, stipend, kickback, lubrication) do not accurately describe a payment made as a reward for sales performance.

Question 10

Companies that do not emphasize service to customers or do not anticipate long-term customer relationships typically use a _____ plan.

Accepted Answer

A straight commission plan is based solely on sales and does not incentivize customer service or building long-term customer relationships.

Question 11

Which of the following is an advantage of a company using combination plans to provide incentives for its salespeople?

Accepted Answer

Combination plans allow for greater flexibility in motivating and controlling salespeople. They can include both salary and commissions, as well as other incentives such as bonuses, which can be adjusted based on salesperson performance or market conditions. This provides a range of options for management to incentivize and reward sales performance, rather than relying solely on commissions or salaries.

Question 12

Arnold is a salesperson.His company's compensation plan involves paying him 14 percent of the total sales he makes per month.This 14 percent is known as the:

Accepted Answer

The 14 percent that Arnold receives from his total sales per month is known as the commission rate. It is the percentage of the sales that he earns as his commission.

Question 13

Alkara receives $200 per week plus 10 percent of the value of all the sales she makes.In a particular week,she makes a sale of $750.The 10 percent of the total revenue of $750 best exemplifies:

Accepted Answer

The 10 percent of the total revenue of $750 refers to incentive pay, as it is a form of variable pay that is earned based on achieving specific goals or targets. In this case, Alkara earns a base pay of $200 per week, but also receives an additional amount based on the value of her sales, which incentivizes her to work harder and increase her sales performance.

Question 14

Michael is a salesperson with Sigma Chi Industries.His incentive pay is determined by the number of units that he sells in a week.Which of the following determines the amount paid to Michael?

Accepted Answer

A commission rate determines the amount paid to Michael as it is the percentage or fixed amount paid per unit sold, which directly affects his incentive pay.

Question 15

Ed works for Lanier Business Products as a sales representative.He receives a straight commission.In weeks when his earned commission is less than $600,the company loans him enough money against future commissions to allow him to receive $600.In weeks when Ed earns more than $600,the extra is used for repaying the previous loan.For Ed,the guaranteed $600 is his:

Accepted Answer

The guaranteed $600 that Ed receives is known as a draw, which is essentially an advance on future commissions. Unlike a salary or bonus, the draw must be repaid by future earnings. It is not a sales quota because it is not a specific sales target that Ed must reach. It is also not an activity quota as this refers to a minimum level of sales activities (such as number of calls made or meetings held) rather than a guaranteed payment.

Question 16

Straight salary plans are typically used when:

Accepted Answer

Straight salary plans are often used in scenarios where the individual efforts of salespeople are difficult to measure, when sales involve long negotiation periods, when a team effort is required, or when advertising plays a more significant role than personal selling. These situations make it challenging to directly link sales outcomes to the efforts of individual salespeople, making a fixed salary a more suitable compensation method.

Question 17

_____ is the amount of money paid to a salesperson at regular intervals regardless of his or her performance.

Accepted Answer

A salary is a fixed amount of money paid to an employee on a regular basis, regardless of their performance or sales results. This is in contrast to commission, which is based on the amount of sales made, or incentives/bonuses which are typically given as additional rewards for exceeding sales targets or other performance goals.

Question 18

A commission plan is likely to be used when:

Accepted Answer

A commission plan is often used in various scenarios to motivate salespeople by tying their earnings directly to their performance. This can be particularly effective when dealing with part-time salespeople (A and B), as it incentivizes them to perform better despite their limited hours. While C and D might seem less intuitive, commission plans can also be used in these contexts, as they focus on immediate sales results rather than long-term customer service or relationships. Therefore, a commission plan can be applicable in any of these situations.

Question 19

A salesperson who receives a fixed amount of money for working during a specified time is compensated using the _____ method.

Accepted Answer

A salesperson who receives a fixed amount of money for working during a specified time is compensated using the straight salary method. This method provides the salesperson with stability in their income and allows them to focus on building relationships and making sales rather than worrying about their commission or bonus structures.

Question 20

What is the easiest method to evaluate the performance of salespeople?

Accepted Answer

Measuring total sales is the easiest and most straightforward method to evaluate the performance of salespeople. It provides a clear number to compare and analyze their success in generating revenue for the company. However, it is important to consider other factors such as customer service, product knowledge, and market awareness to ensure a well-rounded evaluation.

Quiz 16: Managing Within Your Company