The company compensates sales managers based on a combination of output and profits?

• Create an argument supporting that using the earnings-based valuation method yields the most accurate results. Provide support for your argument.
January 4, 2018
49. Ricardo acquired a warehouse for business purposes on August
January 4, 2018

The company compensates sales managers based on a combination of output and profits?

Suppose that a CEO’s goal is to increase profitability and output from her company by bolstering its sales force and that it is known that profits as a function of output are π = 40q − 2q2 (in millions of U.S. dollars). Graph the company’s profit function. Compare and contrast output and profits using the following compensation schemes based on the assumption that sales managers view output and profits as “goods”:

(a) The company compensates sales managers solely based on output,

(b) The company compensates sales managers solely based on profits, and

(c) The company compensates sales managers based on a combination of output and profits?

 

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