Jim has been employed at Gold Key Realty at a salary of $2400 per month during t
ID: 421871 • Letter: J
Question
Jim has been employed at Gold Key Realty at a salary of $2400 per month during the past year. Because Jim is considered to be a top salesman, the manager of Gold Key is offering him one of the three salary plans for the next year: (I) a 25 % raise to $3000 per month, (II) a base salary of $1500 plus $600 per house sold; or, (III) a straight commission of $1500 per house sold. Over the past year, Jim has sold up to 6 homes in a month.
a) Compute the monthly salary payoff table for Jim.
b) For this payoff table find Jim’s optimal decision using: (1) Optimistic, (2) Pessimistic, (3) Minmax regret approach.
c) Suppose during the past year the following is Jim’s distribution of home sales. If one assumes that this is a typical distribution for Jim’s monthly sales, which salary plan should Jim select?
Home Sales Number of Months
0 1
1 2
2 1
3 2
4 1
5 3
6 2
Explanation / Answer
In optimistic situation he should select plan III, a straight commission of $1500 per house sold
In pessimistic situation he should select plan I, a 25 % raise to $3000 per month
In Minmax regret plan I will be selected.
c- Total number of house sold by Jim in previous year= 41. Annual Salary in different plan will be
Plan I= 3000*12= 36,000
Plan II= 1500*12+600*41=42,600
Plan III= 1500*41= 61,500
Jim should select Plan III as it has highest salary offered.
Salary Plan Salary I 3000 II 5100 III 9000Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.