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March 26, 2017

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a material handling company pays each of its sale persons a base salary plus a percentage of revenue generated. To reduce overhead EFI has switched from giving each salesperson a company car to reimbursing them .35 for each business related mile driven. Accounting records show that on average each sales person drives 100 business related miles per day 240 days per year. Can you think of an alternative way to restructure the compensation of EFI’s sales force that could potentially enhance profits?

  • managerial economics - ,

    The only way to restructure the sales force's compensation is to (a) reduce their mileage rate, (b) reduce the number of miles driven by each employee in a year, (c) reduce their salaries, or (d) reduce their commission rates.

    Profits could be enhanced if these employees weren't each required to drive 24,000 miles per year.

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