Figure 16-6 shows two different compensation schemes for the Vortex Vacuum Cleaner Company.
Under Scheme I, the firm pays a consistent wage of $2,500 per month to all its salespeople for sales up to 20 vacuum cleaners. For sales of 21-30 vacuum cleaners, its salespeople earn $125 per vacuum cleaner, with wages capped at $3,750 per month for sales over 30 vacuum cleaners. If a salesperson has three consecutive months of sales below 20 vacuum cleaners, the person loses his or her job.
Scheme II represents a straight commission, with salespeople earning a commission of $125 per vacuum cleaner sold, with no wage cap.
-Refer to Figure 16-6. Which of the following statements about Scheme II is false?

Question

Figure 16-6 shows two different compensation schemes for the Vortex Vacuum Cleaner Company. 
Under Scheme I, the firm pays a consistent wage of $2,500 per month to all its salespeople for sales up to 20 vacuum cleaners. For sales of 21-30 vacuum cleaners, its salespeople earn $125 per vacuum cleaner, with wages capped at $3,750 per month for sales over 30 vacuum cleaners. If a salesperson has three consecutive months of sales below 20 vacuum cleaners, the person loses his or her job. 
Scheme II represents a straight commission, with salespeople earning a commission of $125 per vacuum cleaner sold, with no wage cap.
-Refer to Figure 16-6. Which of the following statements about Scheme II is false?

Quizplus · Accepted Answer

Scheme II, as described, seems to incentivize productivity without necessarily introducing risk for senior employees. The risk for senior employees would typically be associated with schemes that reduce base pay in favor of performance-based pay, which is not implied to be a characteristic of Scheme II based on the options provided.

Figure 16-6 Shows Two Different Compensation Schemes for the Vortex