You are considering a sales job that pays you on a commission basis or a salarie

Question

You are considering a sales job that pays you on a commission basis or a salaried position that pays you $50,000 per year. Historical data suggests the following probability distribution for your commission income. Which job has the higher expected income?

                              Probability of

Commission       Occurrence

$15,000                         .15

$35,000                         .20

$48,000                         .35

$67,000                         .22

$80,000                         .08

Explanation / Answer

Expected income on commision basis = .15X15,000+.20X35,000+.35X48,000+.22X67,000+.08X80,000

Expected income on commision basis = $ 47,190

salaried position = $ 50,000

Hence salaried position has the higher expected income.

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