Salespersons’ incentives, customer profitability In response to how the sales incentives might be contributing to falling profits despite growing sales, Chan Company’s controller has produced the following information on last year’s sales to two customers that purchased a variety of products from the company: CUSTOMERS CARLSON DONNER Sales $450,000 $400,000 Cost of goods sold 180,000 80,000 MSDA expenses, excluding sales commissions 320,000 65,000 Required (a) Which customer is more profitable for the company? (b) Compare a sales incentive scheme that pays 2% of sales revenue to an incentive scheme that pays 4% of customer profit. How will each scheme affect salespersons’ desire to increase sales to each customer?

Salespersons’ incentives, customer profitability In response to how the sales incentives might be contributing to falling profits despite growing sales, Chan Company’s controller has produced the...

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Salespersons’ incentives, customer profitability In response to how the sales incentives might be contributing to falling profits despite growing sales, Chan Company’s controller has produced the following information on last year’s sales to two customers that purchased a variety of products from the company:

	CUSTOMERS
	CARLSON	DONNER
Sales	$450,000	$400,000
Cost of goods sold	180,000	80,000
MSDA expenses, excluding sales commissions	320,000	65,000

Required

(a) Which customer is more profitable for the company?

(b) Compare a sales incentive scheme that pays 2% of sales revenue to an incentive scheme that pays 4% of customer profit. How will each scheme affect salespersons’ desire to increase sales to each customer?

Answered Same Day Dec 24, 2021

Solution

Robert answered on Dec 24 2021

127 Votes

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Salespersons’ incentives, customer profitability In response to how the sales incentives might be contributing to falling profits despite growing sales, Chan Company’s controller has produced the...

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