Question

Julia is offered a job selling advertising for two different companies. Company A offers a base salary of $30,000 per year plus a year-end bonus equal to 3% of her total sales. Company B offers a base salary of $25,000 per year plus a year-end bonus equal to 5% of her total sales. Which statement best describes the two offers?. . Company A pays better when total sales are less than $37,500, but company B pays better when total sales exceed $37,500.. . Company A pays better when total sales are less than $250,000, but company B pays better when total sales exceed $250,000..

Answer 1

We use $37,500 as a basis of sales per year for the two companies for Julie. . When the two companies are equated, 30,000 + 0.03*x = 25,000 + 0.05*x where x is equal to $250,000 as total sales that equates both. This means, sales below this $250,000 line has lower pay than the other. 

Answer 2

Answer:

Company A pays better when total sales are less than $250,000, but company B pays better when total sales exceed $250,000.

Explanation:

To make this calculation, simply calculate the variable remuneration (commission) and add to the value of fixed income.

Company A: $30,000 + 0,03*(total sales)

Company B: $25,000 + 0,05*(total sales)

Note: 3/100 = 0.03 and 5/100 = 0.05

( Scenario A) If she sells :$37,500

Company A: $30,000 + 0,03*($37,500) = $30,000+$1.125,00 = $31.125,00

Company B: $25,000 + 0,05*($37,500) =$25,000+$1.875,00 = $26.875,00

( Scenario B) If she sells $250,000

Company A: $30,000 + 0,03*($250,000) = $30,000+$7.500,00 = $37.500,00

Company B: $25,000 + 0,05*($250,000) =$25,000+$12.500,00 = $37.500,00

Therefore, if sales are $ 250,000 the compensation will be the same. For amounts below this, Company A will pay more. For amounts above that, company B will pay better. This is because from 250,000 onwards, the difference in fixed wages is offset by the higher commission from company B. Since company B pays a higher commission, any sales above that will be better paid by company B.