To maximize its profits, a company should pay the highest sales commissions on those products with the:

Question

Quizplus · Accepted Answer

The contribution margin indicates the amount of profit that each unit of a product contributes towards the company's fixed costs and overall profits. Therefore, paying the highest sales commissions on products with the highest contribution margin would result in the highest overall profits for the company. High prices or low variable/fixed costs do not necessarily correlate with high profits if the contribution margin is low, so these factors alone should not guide commission payment decisions.

To Maximize Its Profits, a Company Should Pay the Highest