Skate Magic manufactures three different product lines, Model TS, Model AY, and Model GG. Considerable market demand exists for all models. The following per unit data apply:
-How can the Vice-president of sales at Skate Magic encourage her salespeople to promote the more profitable model?
A)Put all sales persons on salary.
B)Provide higher sales commissions for higher priced items.
C)Provide higher sales commissions for items with the greatest contribution margin per constrained resource.
D)Provide higher sales commissions for higher priced items and items with the greatest contribution margin per constrained resource.

Question

Skate Magic manufactures three different product lines, Model TS, Model AY, and Model GG. Considerable market demand exists for all models. The following per unit data apply: 
-How can the Vice-president of sales at Skate Magic encourage her salespeople to promote the more profitable model?
A)Put all sales persons on salary. 
B)Provide higher sales commissions for higher priced items. 
C)Provide higher sales commissions for items with the greatest contribution margin per constrained resource. 
D)Provide higher sales commissions for higher priced items and items with the greatest contribution margin per constrained resource.

Quizplus · Accepted Answer

Providing higher sales commissions for items with the greatest contribution margin per constrained resource would encourage salespeople to promote the more profitable Model GG, which has the highest contribution margin per unit of the constrained resource (machine hours). This would also incentivize salespeople to sell products that make the best use of the company's resources. Salary and higher commissions based solely on price would not necessarily encourage salespeople to focus on promoting the more profitable model.

Skate Magic Manufactures Three Different Product Lines, Model TS, Model