Question 1

Any compensation plan may have several objectives, depending upon the needs of the specific company, sales manager, or salesperson. From the sales representatives' vantage point, the plan should offer the following except:
A) income regularity
B) fairness
C) distributive justice
D) reward for superior performance

Accepted Answer

Distributive justice is more of a broader organizational concern rather than a specific objective from the sales representatives' perspective. Sales representatives are more focused on personal benefits like income regularity, fairness, and rewards for superior performance.

Question 2

Angela Claridge is a sales representative who is most interested in making sure that her income covers her home mortgage, food, and utilities each month. Ms. Claridge probably feels that the most important criterion for a compensation plan is to ensure:
A) fairness
B) reward for superior performance
C) income regularity
D) simplicity

Accepted Answer

Ms. Claridge is focused on ensuring her income covers essential expenses consistently, which aligns with the need for income regularity.

Question 3

The factors that determine the basic level of pay for a sales force include all except the following:
A) the skills, experience, and education required to do the work successfully
B) the level of income for comparable jobs in the company
C) the level of income for comparable jobs in the industry
D) all the above

Accepted Answer

All the options listed (A, B, and C) are factors that determine the basic level of pay for a sales force, so "all the above" is not an exception.

Question 4

Sales managers must decide what proportion of each salesperson's total income should be earned through incentives and whether the incentive pay schedule should be:
A) fixed
B) regressive
C) progressive
D) all the above

Accepted Answer

All the above are correct because sales managers can decide what proportion of each salesperson's total income should be earned through incentives and whether the incentive pay schedule should be fixed, regressive, or progressive.

Question 5

____________ rates, which steps up the percentage of commission or bonus awarded as sales volume grows past designated levels, are best when profit margins climb significantly after the break-even point is reached.
A) fixed
B) regressive
C) progressive
D) all the above

Accepted Answer

Progressive rates increase the percentage of commission or bonus as sales volume grows, which is ideal when profit margins increase significantly after reaching the break-even point.

Question 6

Reductions in the percentage of commission or bonus awarded as sales volume increases are referred to as __________ incentives.
A) progressive
B) regressive
C) fixed
D) impossible to tell from the information provided

Accepted Answer

Regressive incentives decrease the percentage of commission or bonus as sales volume increases, which is the opposite of progressive incentives.

Question 7

Robert Finney is a sales representative for a large consumer products manufacturer. He is having a good sales year. At the end of the second quarter of the year, he had sold $1,000,000 worth of products for which he received $25,000 in commissions. By the end of the year, he had sold a total of $2,000,500 worth of products and had earned $45,007.50 in total commission for the year. Mr. Finney's commission rate is:
A) fixed
B) regressive
C) progressive
D) curvilinear

Accepted Answer

The answer of Robert Finney is a sales representative for...

Question 8

Managers must ____________any compensation plan before adopting it, which helps identify its probable impact on profits, they need to compute the sales and potential earnings the new plan would have offered each salesperson over the past several years.
A) pretest the plan
B) establish specific objectives
C) develop the compensation mix
D) administer the plan

Accepted Answer

Pretesting the plan involves evaluating its potential impact by analyzing historical data, which helps in understanding how it would affect profits and earnings.

Question 9

There is considerable controversy regarding pay secrecy versus pay disclosure. Which of the following statements is correct regarding this issue?
A) Most sales managers feel that peer pay should be disclosed to the sales force members.
B) Salespeople seem to become initially more satisfied after implementation of open pay policies.
C) Sales organizations that are not capable of objectively measuring performance are likely to have problems with open pay systems.
D) Salespeople seem to become much more satisfied (or at least initially) with their superiors after implementation of open pay policies.

Accepted Answer

The answer of There is considerable controversy regarding pay secrecy...

Question 10

Straight salary plans are best in all but which of the following situations?
A) team selling
B) long negotiating periods
C) during the first year for sales trainees
D) simple promotional mix, i.e., where the company relies almost exclusively on personal selling instead of advertising to market its products

Accepted Answer

Straight salary plans are not ideal when a company relies heavily on personal selling instead of advertising because they do not incentivize salespeople to maximize their sales efforts.

Question 11

Which of the following compensation plans is most frequently used by the aerospace petroleum, and chemical industries, where service and engineering skills are particularly important to customers?
A) salary plus incentive
B) straight salary
C) straight commission
D) combination

Accepted Answer

The aerospace, petroleum, and chemical industries often use a straight salary compensation plan because it ensures a stable income for employees with specialized skills, which is important in fields where service and engineering expertise are critical.

Question 12

As a method of compensation, straight salary has all of the following advantages except:
A) gives a higher degree of company control over salespeople's activities
B) permits rapid adaptation of sales force efforts to changing market demands and company objectives
C) is difficult to administer
D) helps develop a sense of loyalty to the company

Accepted Answer

Straight salary is actually easy to administer compared to other compensation methods like commission-based pay.

Question 13

As a method of compensation, straight salary has all of the following disadvantages except:
A) it provides no financial incentive to put forth extra effort
B) it may increase selling costs because salaries remain the same even when sales are not being made
C) it tends to lead to income inequalities
D) it significantly reduces the sales managers control over sales activities

Accepted Answer

The answer of As a method of compensation, straight salary...

Question 14

Straight commission plans are
A) easily calculated
B) those with a "ceiling" on earnings
C) ones where income is based on subjective evaluations by sales managers
D) suited for team selling to make a sale

Accepted Answer

Straight commission plans are easily calculated because they are based solely on the sales made, without additional factors like ceilings or subjective evaluations.

Question 15

Which of the statements below is incorrect regarding commission rates?
A) progressive rates, which increase the percent of commission awarded as sales volume increases, are best when profit margins climb sharply after the break-even point is reached
B) regressive commission rates are usually utilized when there is a high probability of windfall sales or propensity to overload customer inventories
C) fixed commission rates are the easiest to calculate
D) none of the above are incorrect

Accepted Answer

All the statements A, B, and C are correct regarding commission rates, so none of them are incorrect.

Question 16

The advantages of a straight commission plan include all of the following, except:
A) costs are proportional to sales
B) ease of calculation-salespeople can keep track of earnings
C) more emphasis on nonselling tasks (service, etc.)
D) salespeople have maximum work freedom

Accepted Answer

The answer of The advantages of a straight commission plan...

Question 17

The advantages of a straight commission plan include all of the following, except:
A) poorly performing salespeople eliminate themselves by quitting
B) income is based strictly on accomplishments, not on subjective evaluations by sales managers
C) salespeople have minimum work freedom
D) costs are proportional to sales

Accepted Answer

A straight commission plan typically offers salespeople maximum work freedom, not minimum, as they are incentivized to manage their time and efforts to maximize sales and income.

Question 18

The disadvantages of a straight commission plan include all of the following, except:
A) excessive emphasis may be placed on sales volume rather than profitable sales
B) salespeople have high loyalty to the company
C) because of extreme fluctuations in earnings, many salespeople may face uncertainty about meeting daily living expenses for their families
D) non-selling activities like service, missionary sales, and displays are often neglected

Accepted Answer

Salespeople having high loyalty to the company is not a disadvantage of a straight commission plan; it is generally considered a positive aspect.

Question 19

The disadvantages of a straight commission plan include all of the following, except:
A) there may be little sales force turnover rates when there is a recession
B) salespeople may overload customers with inventory, thereby straining long-term customer relationships
C) windfall earnings may come about under good business conditions, which may be disturbing to sales management
D) flexibility to split territories or transfer salespeople is diminished because of limited means of control over the sales force

Accepted Answer

A straight commission plan can lead to high sales force turnover during a recession, not low turnover, as salespeople may leave due to reduced earnings.

Question 20

Dorothy Brenner is a sales rep whose commission plan includes a weekly draw of $400 plus a commission rate of 10 percent on dollar sales volume. What is Ms. Brenner's current year's account balance if, by the end of the second week in February, her sales record looks like this: Week 1 = $2,000, Week 2 = $3,000, Week 3 = $3,500, Week 4 = $4,000, Week 5 = $6,000, and Week 6 = $7,000?
A) +$350
B) +$200
C) +$150
D) +$100

Accepted Answer

The answer of Dorothy Brenner is a sales rep whose...

Quiz 12: Sales Force Compensation

Any compensation plan may have several objectives, depending upon the needs of the specific company, sales manager, or salesperson. From the sales representatives' vantage point, the plan should offer the following except:

Angela Claridge is a sales representative who is most interested in making sure that her income covers her home mortgage, food, and utilities each month. Ms. Claridge probably feels that the most important criterion for a compensation plan is to ensure:

The factors that determine the basic level of pay for a sales force include all except the following:

Sales managers must decide what proportion of each salesperson's total income should be earned through incentives and whether the incentive pay schedule should be:

____________ rates, which steps up the percentage of commission or bonus awarded as sales volume grows past designated levels, are best when profit margins climb significantly after the break-even point is reached.

Reductions in the percentage of commission or bonus awarded as sales volume increases are referred to as __________ incentives.

Managers must ____________any compensation plan before adopting it, which helps identify its probable impact on profits, they need to compute the sales and potential earnings the new plan would have offered each salesperson over the past several years.

There is considerable controversy regarding pay secrecy versus pay disclosure. Which of the following statements is correct regarding this issue?

Straight salary plans are best in all but which of the following situations?

Which of the following compensation plans is most frequently used by the aerospace petroleum, and chemical industries, where service and engineering skills are particularly important to customers?

As a method of compensation, straight salary has all of the following advantages except:

As a method of compensation, straight salary has all of the following disadvantages except:

Straight commission plans are

Which of the statements below is incorrect regarding commission rates?

The advantages of a straight commission plan include all of the following, except:

The advantages of a straight commission plan include all of the following, except:

The disadvantages of a straight commission plan include all of the following, except:

The disadvantages of a straight commission plan include all of the following, except: