Scenario 18.1 Use the following to answer the questions.
Jafrum, Inc. is a wholesale supplier of motorcycle accessories, clothing, and tools to various motorcycle retail stores around the country. Jafrum does not manufacture these items, but sells them to other retailers and also sells its merchandise through its website. Sean Thompson is one of the salespeople for Jafrum, and is responsible for obtaining new customers, increasing sales to current customers, and visiting the retail stores throughout the country. Recently, he has been given the sales objective from Jafrum's management to increase sales dollars by 15% in the coming year by adding new customers. Sean's current compensation is based on a $1,000 per month draw, plus 5% of all sales over $100,000. His salary last year totaled $42,000. Management has given Sean the choice of going to a compensation plan where he will earn 15% of all sales, but no draw.
Refer to Scenario 18.1. Currently, Sean's compensation is based on the ____ plan; however, he is considering changing to the ____ plan.
A) straight salary; salary plus commission
B) straight commission; straight salary
C) salary plus commission; straight commission
D) salary plus bonus; straight bonus
E) straight bonus; straight commission

Question

Quizplus · Accepted Answer

Currently, Sean's compensation is based on the salary plus commission plan, where he receives a $1,000 draw and 5% commission on all sales over $100,000. However, he is considering changing to the straight commission plan, where he would earn 15% commission on all sales but no draw. This would incentivize Sean to focus on increasing sales to meet his goal of a 15% increase in sales dollars, which would ultimately benefit Jafrum. It would also simplify his compensation structure and allow for more direct tracking of his performance.