Figure 17-6

Figure 17-6 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 17-6.Which of the following statements about Scheme II is false?
A)It is likely to draw highly productive workers who see the opportunity to increase their wages.
B)It could discourage less productive workers and induce them to leave the firm.
C)It allows workers to increase their monthly wage without penalizing those who are content with their monthly wage.
D)It is more risky for senior employees.

Question

Figure 17-6
  
Figure 17-6 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 17-6.Which of the following statements about Scheme II is false?
A)It is likely to draw highly productive workers who see the opportunity to increase their wages. 
B)It could discourage less productive workers and induce them to leave the firm. 
C)It allows workers to increase their monthly wage without penalizing those who are content with their monthly wage. 
D)It is more risky for senior employees.

Quizplus · Accepted Answer

Scheme II is a straight commission scheme which means that the pay is based solely on the number of sales made by the worker. This means that the scheme is more risky for senior employees who may have built a customer base over time and may not have the same level of productivity as they did earlier in their career. Therefore, statement D is false. Statements A, B, and C are all true.

Figure 17-6 Figure 17-6 Shows Two Different Compensation Schemes for the Vortex