Franie's Futons currently sells 55 futons a month at $450.00 for a total of $24,750 each month. Franie wants to increase the sales volume and has decided the best way to do that is to offer incentives. An employee will have the following bonus schedule and has also placed a monetary value on their marginal effort.
How many futons will this employee sell?
A) 65
B) 75
C) 85
D) 95
E) 105

Question

Franie's Futons currently sells 55 futons a month at $450.00 for a total of $24,750 each month. Franie wants to increase the sales volume and has decided the best way to do that is to offer incentives. An employee will have the following bonus schedule and has also placed a monetary value on their marginal effort. 
How many futons will this employee sell?
A) 65 
B) 75 
C) 85 
D) 95 
E) 105

Quizplus · Accepted Answer

To find out how many futons the employee will sell, we need to use the marginal effort column. Start with the current level of sales (55) and add the marginal effort of the first incentive level (5). This gives a new level of sales of 60. Check to see if this meets the 10% increase requirement by multiplying the original sales by 1.1:

55 x 1.1 = 60.5

Since 60 is less than 60.5, we need to continue up the chart. Add the marginal effort of the second incentive level (10) to the previous level of sales (60). This gives a new level of sales of 70. Check if it meets the 10% increase requirement:

55 x 1.1 = 60.5 
60 x 1.1 = 66

Since 70 is greater than 66, we have met the requirement and can stop. Therefore, the employee will sell 85 futons.

Franie's Futons Currently Sells 55 Futons a Month at $450