Salmon Co. is deciding between two compensation plans. In Plan A, salaries are $100,000 and the commission is $2 per unit. In Plan B, salaries are $40,000 and the commission is $4 per unit.
At what level of sales, in units, is Salmon indifferent between the two compensation plans?
A) 30,000
B) 20,000
C) 10,000
D) Cannot be determined

Question

Quizplus · Accepted Answer

To find the indifference point, set the total compensation of both plans equal: $100,000 + $2x = $40,000 + $4x. Solving for x gives x = 30,000 units.

Salmon Co Is Deciding Between Two Compensation Plans