Two months ago, the owner of a car dealership (and a current football star) sign

Question

Two months ago, the owner of a car dealership (and a current football star) significantly changes his sales manager's compensation plan. Under the old plan. the manager was paid a salary of $6,000 per month; under the new plan, she receives 2% of the sales price of each car sold. During the past 2 months, the number of cars sold increased by 40%, but the dealership's margins (and profits) significantly declined. According to the sales manager, "Consumers are driving harder bargains and I have had to authorize significantly lower prices to remain competitive." What advice would you give the owner of the dealership?

Explanation / Answer

the dealer should inpose the incentive per car above a certain no. of cars sold i.e the manager will be paid the incentive per car only after he has sold a certain number of cars. this number will be decided on the basis of the profit margin of the dealer according to the profit he desires from the sales and what he gets form the sale of each car. if this is not followed the manager will increase the sales by reducing the profit margin and try to sell as many cars as possible.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.