A. See the correct answer.
B. See the correct answer.
C. See the correct answer.
D. There is more than one correct way to calculate the answer to this problem. One solution is to calculate the sales volume where J J Motors will indifferent as to which plan is selected. Remember that the total sales volume will be the sales made per salesperson multiplied by the number of sales personnel. The solution can be calculated algebraically as follows:Let X be the monthly sales per salesperson. Create an equation containing both possible payment methods and set the two payment methods equal to one another. Solve for X, and then multiply the value you get for X by 45 to get the total sales for all salespeople per month.
.06X = $2,000 + .02X
Simplify by subtracting .02X from both sides of the equation:
.04X = $2,000
Solve for X by dividing both sides of the equation by .04:
X = $50,000, which is the sales per salesperson at which the payment under both plans will be equal. Multiply $50,000 by 45 salespeople to get the total sales per month at which both payment plans will result in the same payments to salespeople:
$50,000 * 45 = $2,250,000
To check:
At a sales volume of $2,250,000, a straight commission of 6% will result in a total payment of
$2,250,000 × .06, or $135,000.
At a sales volume of $2,250,000, a salary of $2,000 per month paid to each salesperson plus a commission of 2% will result in a total payment of:
($2,000 × 45) + (.02 × $2,250,000) = $135,000
If you calculated the answer a different way but got the same answer, then your method is also correct.