Discussion: Sonja accepted a new position at a car dealership and was provided the following two options.

Question

i need to provide an example that shows where there would be an instance that each of them would be more beneficiaL

need to determine which would be the best to choose and why.

 

*sonja could receive a base pay of $2000 plus 3% commission or to sticky be paid with a 15% commission 

Answer 1

Hello Carolyn.

 

Can you see that a good salesperson would prefer a commission-based salary and a poor salesperson would rely more on a base salary?

 

What if Sonja didn't sell any cars? (Sales = 0)

What if Sonja sold $1,000,000 worth of cars? (Sales = $1,000,000)

 

The above are extreme examples. If you want to solve the problem more mathematically,

 

try to set up equations for the 2 different pay rates.

 

X = sales.

 

$2000 plus 3% commission: 2000 + 0.03X

 

15% commission: 0.15X.

 

The pays would be equal when 2000 + 0.3X = 0.15X. Solve for X.

 

So, for sales larger than X, the 15% model would be better, and for sales less than X, the $2000 base plus 3% commission would be better.