Question 1

Payment based on the principle that earnings should vary with performance refer to straight commission.

Accepted Answer

Straight commission is a payment method where earnings are directly tied to performance, typically sales, with no base salary.

Question 2

Straight commission are historically based on dollar or unit sales volume, but can be tied to measures of profitability.

Accepted Answer

Straight commission can be structured to incentivize sales representatives based on profitability metrics, aligning their earnings with the company's financial goals.

Question 3

A plan that combines two or three of the basic compensation methods (e.g., salary plus commission) is known as a combination compensation plan.

Accepted Answer

A combination compensation plan integrates multiple compensation methods, such as salary and commission, to provide a more balanced and motivating pay structure for employees.

Question 4

A reference description refers to the written description of the responsibilities and performance criteria for a particular position.

Accepted Answer

The answer of A reference description refers to the written...

Question 5

The fringe mix refers to the relationship between salary, commission, and other incentives.

Accepted Answer

The fringe mix typically refers to the combination of fringe benefits offered to employees, such as health insurance, retirement plans, and other non-wage compensations, rather than salary, commission, and incentives.

Question 6

Progressive incentives are best when profit margins climb significantly before the break-even point is reached.

Accepted Answer

Progressive incentives are more effective when profit margins increase after the break-even point, as they encourage continued performance and profitability beyond covering initial costs.

Question 7

Decreases the percentage of commission or bonus awarded as sales volume increases are referred to as regressive incentives.

Accepted Answer

Regressive incentives involve reducing the percentage of commission or bonus as sales volume increases, which is the opposite of progressive incentives where the percentage increases with higher sales.

Question 8

Regressive incentives are should not be used where there is a high probability of "windfall" sales and a propensity to overload customer inventories.

Accepted Answer

The answer of Regressive incentives are should not be used...

Question 9

Payments made at the discretion of management for specific achievements are known as a bonus.

Accepted Answer

Bonuses are discretionary payments made by management to reward employees for specific achievements or performance.

Question 10

Fringe benefits are financial accounts that enable sales representatives to carry out necessary selling activities.

Accepted Answer

Fringe benefits are additional compensations provided to employees, such as health insurance or retirement plans, not financial accounts for selling activities.

Question 11

A draw is sum of money paid against future commissions.

Accepted Answer

A draw is an advance payment to a salesperson against future commissions they are expected to earn.

Question 12

A "guaranteed draw" has to be repaid in the event of insufficient sales commissions.

Accepted Answer

A "guaranteed draw" is a fixed amount paid to an employee, typically in sales, that does not need to be repaid if commissions are insufficient. It acts as a safety net for the employee's income.

Question 13

Compensation plans are designed to achieve certain organizational objectives, for example, larger market share, higher profit margins, introducing new products or services, winning new accounts, or reducing selling costs.

Accepted Answer

Compensation plans are strategic tools used by organizations to align employee performance with business goals, such as increasing market share or reducing costs.

Question 14

During the first year when salespeople learn their job, a salary is usually required to attract new recruits into selling and to compensate the trainee, at least until commissions are large enough to provide an adequate living standard.

Accepted Answer

Salespeople often receive a salary during their initial training period to ensure financial stability until they can earn sufficient income through commissions.

Question 15

Long negotiation periods of a year or more may be needed to make a complex sale of a system of products and services or big-ticket items, such as private jets.

Accepted Answer

Complex sales involving systems of products and services or big-ticket items often require long negotiation periods due to the complexity, high cost, and multiple stakeholders involved in the decision-making process.

Question 16

Missionary selling jobs are primarily selling jobs aimed at developing goodwill among customers (such as physicians, pharmacies, hospitals, museums, or government agencies that serve as product deciders or recommenders for their own patients, clients, or customers) by providing them with information, advice, service, and assistance in prescribing, recommending, or merchandising (setting up educational displays or advertisements) products.

Accepted Answer

The answer of Missionary selling jobs are primarily selling jobs...

Question 17

Companies without large working capital often use commissions as a method of keeping selling costs directly related to sales.

Accepted Answer

Companies with limited working capital may prefer commission-based compensation for sales staff, as it aligns sales costs with actual sales revenue, reducing fixed expenses.

Question 18

The disadvantages of a straight commission plan include no ceiling on potential earnings and income is indirectly related to productivity.

Accepted Answer

A straight commission plan typically has no ceiling on potential earnings, which is an advantage, and income is directly related to productivity, not indirectly.

Question 19

The advantages of a straight commission plan include salespeople have little loyalty to the company and there may be little sales force turnover rates when there is a recession.

Accepted Answer

A straight commission plan can lead to high turnover rates during a recession as salespeople may leave for more stable income opportunities, and it can also result in low loyalty to the company since income is solely based on sales performance.

Question 20

The salary plus commissions combination is best when management wants to get high sales without sacrificing customer service. It is good for new salespeople, since it provides more security than straight commission.

Accepted Answer

The salary plus commissions model offers a stable income with the potential for additional earnings, motivating salespeople to perform well while ensuring they maintain customer service standards. It is particularly beneficial for new salespeople who need financial security as they build their skills and client base.

Quiz 12: Sales Force Compensation