Luxus, Inc. employs 45 sales personnel to market its line of luxury automobiles. The average car sells for $23,000, and a 6% commission is paid to the salesperson. Luxus, Inc. is considering a change to the commission arrangement where the company would pay each salesperson a salary of $2,000 per month plus a commission of 2% of the sales made by that salesperson. The amount of total monthly car sales at which Luxus, Inc. would be indifferent as to which plan to select is:

Question

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The total commission paid under the current plan is 6% of $23,000 * 45 = $60,900. Under the new plan, the total commission paid would be 2% of total sales. The total sales at which the two plans would be indifferent is the sales level at which the commission under the new plan equals $60,900. This occurs when total sales = $60,900 / 0.02 = $3,045,000.