Reference no: EM133006505

In response to how the sales incentives might be contributing to falling profits despite growing sales, Chan Company's controller has produced the following information on last year's sales to two customers who purchased a variety of products from the company:

Cost Information                                                              Customers
                                                                 Carlson                Donner
Sales                                                         $450,000              $400,000
Cost of goods sold                                        $180,000                $80,000
MSDA expenses, excluding sales commissions      $320,000                     $65,000

Problem 1: Which customer is more profitable for the company?

Problem 2: Compare a sales incentive scheme that pays 2% of sales revenue to an incentive scheme that pays 4% of customer profit. How will each scheme affect salespersons' desire to increase sales to each customer?