Reference no: EM132520376

Question 1: Truth Inducers Corporation has implemented the following bonus scheme for its regional sales managers. The mangers are paid 5% of the sales forecast and a 3% incremental pay for every $ of actual sales in excess of forecast whenever actual sales exceed forecast. However, if actual sales fall below the forecast, the total payment is 5% of the sales forecast minus 7% of the amount by which sales fall below forecast. Under the above scheme, a sales manager, who has private knowledge of expected sales of $10,000, can expect to make a bonus of

Option 1: $450 when she makes a forecast of $10,000

Option 2: $480 when she makes a forecast of $11,000

Option 3: $450 when she makes a forecast of $9,000

Option 4: $430 when she makes a forecast of $11,000

Option 5: None of the above