Suppose compensation is given by W = 100,000 + 157  + 12S,where W = total compensation of the CEO,  = company profits (in millions)= $340,and S = sales (in millions)= $700.What percentage of the CEO's total earnings is tied to sales of the firm?

Question

Quizplus · Accepted Answer

First, calculate the total compensation of the CEO using the given formula: W = 100,000 + 157(340) + 12(700). This equals 100,000 + 53,380 + 8,400 = 161,780. The portion of the compensation tied to sales is 8,400. To find the percentage of the CEO's total earnings tied to sales, divide 8,400 by 161,780 and multiply by 100, which gives approximately 5.2 percent.

Suppose Compensation Is Given by W = 100,000 + 157