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Premier Corporation sells two models of home ice cream makers. Mister Ice Cream and Cold King.Current sales total 60,000 units, consisting of 21,000...
Mister Ice CreamCold KingSelling price$37.00 $43.00 Variable cost$20.50 $32.50 Salespeople currently receive flat salaries that total $200,000. Management is contemplating achange to a compensation plan that is based on commissions in an effort to boost the company'spresence in the marketplace. Two plans are under consideration:Plan A: 10% commission computed on gross dollar sales. Mister Ice Cream sales are anticipated to be 19,500 units. Cold King sales are expected to total 45,500 units.Plan B: 30% commission computed on the basis of production contribution margins. Mister Ice Cream sales are expected to total 39,000 units. Cold King sales areanticipated to be 26,000 units.Required:1.) Define the tem sales mix2.) Comparing Plan A to the current compensation arrangement: a.) Will Plan A achieve management's objective of an increased presence in the market-place ? Briefly explainb.) From a sales-mix perspective, will the salespeople be promoting the product that one would logically expect ? Briefly discussc.) Will the sales force likely be satisfied with the results of Plan A ? Why ?d.) Will Premier likely be satisfied with the resulting impact of Plan A on company profitability? Why3.) Assume that Plan B is under consideration.a.) Compare Plan A and Plan B with respect to total units sold and the sales mix. Comment on the results.b.) In comparison with flat salaries, is Plan B more attractive to the sales force ? To the company ? Show calculations to support your answers.
