The Lombard Company produces and sells officespace dehumidifiers to companies
that own or rent office space.
a Lombard's materials and labor costs for producing the dehumidifiers are $
per unit and the fixed costs of its dehumidifier production plant are $ million. If
Lombard sells a dehumidifier for $ per unit, what is its percent contribution
margin? Show your work.
b If Lombard used revenuebased compensation to pay its sales force, what would
be a salesperson's sales credit for selling dehumidifiers at a price of $ Show
your work.
c If Lombard used the profitbased compensation method described in the course
to pay its sales force and sets the dehumidifier's target price at $ per unit, what
would be a salesperson's sales credit for selling dehumidifiers at a price of
$ Show your work.
d Explain the benefit to Lombard's management of using the profitbased
compensation method of Part c over revenuebased compensation for its sales
force.
