Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 6

EFI -a material handling company-pays each of its salespersons a base salary plus a percentage of revenues generated. To reduce overhead, EFI has switched from giving each salesperson a company car to reimbursing them $0.35 for each business-related mile driven. Accounting records show that, on average, each salesperson drives 100 business-related miles per day, 240 days per year. Can you think of an alternative way to restructure the compensation of EFI 's sales force that could potentially enhance profits? Explain.