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Multiple Products, Selling Costs, and Margin Management
Selling charge are oftentimes variable. For instance, a salesperson can be paid a designated percentage of entire sales. Such schemes have potential to be counterproductive in the multiple product setting. For instance, suppose that the company sells two products. Product A has a per unit sales price of $120, and the Product B has a per unit sales price of $100.
A salesperson, earning a commission computed as 5% of total sales, would desire to sell product A. Though, the company is better off when Product B is sold, because it has a advanced contribution impact ($30 vs. $20). As the result of which, when a business manager considers its program of compensation for the sales staff, care must be given to align the interests of sales force and the company. For the previous instance, it may give better sense to tie the commission to the contribution effects insteed than the sales price.
Do I use the contribution per unit and the total sales for the department in order to calculate the p/v ratio for a department
Kenner company produces two products: SR200 and TX500. Budged sales for four months are as follows; SR200 TX500 May 8,000 20,000 June 13,000 32,000 July 11,000 39,000 August 18,000
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