Structuring Sales Commissions Questar Electronics, a producer of a wide range of consumerproducts, is facing increasing competitive pressures from foreign producers. In response, Questar isreexamining its overall management control system, including the way the company compensatesmembers of its sales force, who currently earn a 10% commission on sales. Below are highly condensed data for two representative products that Questar sells:Alpha OmegaSelling price per unit $100 $125Variable manufacturing cost per unit 80 110Manufacturing contribution margin $ 20 $ 15Required1. 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 salespeople? Why?3. Can you suggest an alternative incentive plan, one that would better align employee and corporate interests (i.e., one that would motivate more goal-congruent behavior)?
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
members of its sales force, who currently earn a 10% commission on sales. Below are highly condensed data for two representative products that Questar sells:
Alpha Omega
Selling price per unit $100 $125
Variable
Manufacturing contribution margin $ 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 salespeople? Why?
3. Can you suggest an alternative incentive plan, one that would better align employee and corporate interests (i.e., one that would motivate more goal-congruent behavior)?
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