The Jurassic Classics has four employees on its sales team and uses a compensation that...
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Accounting
The Jurassic Classics has four employees on its sales team and uses a compensation that provides each person with a base salary of $40,000 per year and the opportunity to earn commission on sales. The current commission is 5% of gross sales, and sales for the most recent period were $2,500,0000. Management is considering making a change to the compensation system and wants to evaluate two possible alternatives: going to a strictly commission-based compensation system and going to purely salary-based compensation. The strictly commission-based method would eliminate the salary but raise the commission to 11% of sales. If the purely salary-based approach is adopted, the salary for each person would rise to $70,000 and the commission would be eliminated.
3. What are some important factors that should be considered before making the decision?
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