The Management of Lantieri Corporation Is Reviewing Its Policies Concerning

Essay

The management of Lantieri Corporation is reviewing its policies concerning compensation of salespersons. The company has four products that use the same constrained resource. Data concerning those products appear below: $\begin{array}{lrrrr}&\text { R100 } & \text { R200 } &{\text { R300 }} & \text { R400 } \\\text { Unit selling price. }&\$ 36.40 & \$ 20.20 & \$ 12.40 & \$ 36.70 \\\text { Unit variable cost }&\$ 17.10 & \$ 6.90 & \$ 2.70 & \$ 20.20 \\\text { Amount of the constrained resource required. }&0.43 & 0.35 & 0.23 & 0.58\end{array}$ The company does not have enough of the constrained resource to satisfy for demand of all four products.
Required:
a. If salespersons are paid commissions that are a set percentage of sales, which product would they prefer to sell? In other words, if it is a choice between selling one unit of one product and one unit of another, which product would they prefer to sell?
b. From the standpoint of the entire company, if it is a choice between sales of one unit of one product versus another, which product should the salespersons emphasize?