[LO 9-3] 9-23 Structuring Sales Commissions Questar Electronics, a producer of a wide range of consumer products, is facing increasing competitive pressures from foreign producers. In response, Questar is reexamining its overall management control system, including the way the company compensates members of its sales force, who currently earn a 10% commission on sales. Below are highly con- densed data for two representative products that Questar sells: Alpha Omega $100 $125 Selling price per unit Variable manufacturing cost per unit Manufacturing contribution margin 80 110 $ 20 $ 15 Required 1. What is the contribution margin for each product?

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Chapter1: Financial Statements And Business Decisions
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[LO 9-3] 9-23 Structuring Sales Commissions Questar Electronics, a producer of a wide range of consumer
products, is facing increasing competitive pressures from foreign producers. In response, Questar is
reexamining its overall management control system, including the way the company compensates
members of its sales force, who currently earn a 10% commission on sales. Below are highly con-
densed data for two representative products that Questar sells:
Alpha
Omega
$100
$125
Selling price per unit
Variable manufacturing cost per unit
Manufacturing contribution margin
80
110
$ 20
$ 15
Required
1. What is the contribution margin for each product?
2. Which of the company's products will likely be more aggressively promoted by the company's sales-
people? Why?
3. Can you suggest an alternative incentive plan, one that would better align employee and corporate inter-
ests (i.e., one that would motivate more goal-congruent behavior)?
Transcribed Image Text:[LO 9-3] 9-23 Structuring Sales Commissions Questar Electronics, a producer of a wide range of consumer products, is facing increasing competitive pressures from foreign producers. In response, Questar is reexamining its overall management control system, including the way the company compensates members of its sales force, who currently earn a 10% commission on sales. Below are highly con- densed data for two representative products that Questar sells: Alpha Omega $100 $125 Selling price per unit Variable manufacturing cost per unit Manufacturing contribution margin 80 110 $ 20 $ 15 Required 1. What is the contribution margin for each product? 2. Which of the company's products will likely be more aggressively promoted by the company's sales- people? Why? 3. Can you suggest an alternative incentive plan, one that would better align employee and corporate inter- ests (i.e., one that would motivate more goal-congruent behavior)?
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