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Submitted By wtresha
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7.3
A. Decreases amount of money available for employee merit based pay because the money available for merit-based pay will now go toward providing health insurance
B. Increase amount of money available for employee merit based pay because increase productivity may mean more revenue that means more money available
C. Increases the amount of money available for employee merit based pay because increase in employer sales means more revenue generated
D. Decreases the amount of money available for employee merit based pay because falling prices means less revenue
E. Decreases the amount of money available for employee merit based pay because of decrease in revenue
7.5
A.
Sales Staff Average Monthly Sales ($) Monthly Salary ($) Salary Expense
Roz Doyle 160,000 6,000 6000/160,000= 3.75%
Daphne Moon 100,000 4,500 4500/100,000= 4.5%
Martin Crane 90,000 3,600 3600/90,000= 4.0%
Niles Crane 75,000 2,500 2500/75,000= 3.33%

B.
Sales Staff Average Monthly Sales ($) Monthly Salary ($) Monthly Income
Roz Doyle 160,000 6,000 160,000*.05= $8,000
Daphne Moon 100,000 4,500 100,000*.05= $5,000
Martin Crane 90,000 3,600 90,000*.05= $4,500
Niles Crane 75,000 2,500 75,000*.05= $3,750
C. A commission based plan results in efficient relative salaries because it is based on the parties involved. It is based on their years of service, the longer they have been with the company the more likely they will have higher sales. Also, it’s based on the total amount of sales, an associate who works hard throughout the month may increase their income on a commission based system.

8.2
The opportunity cost is $9500 because that is how much I would get if he sold the jeep. I could take the opportunity, trade the jeep in for something new, and pay the remaining balance on the loan. The opportunity costs of continuing to drive the jeep are you forgo trading the jeep in for something new and continue to pay on the loan. The financial risk of the lender would be that if I trade the jeep and discontinue making loan payments or lose my job and cannot make timely payments since I still have three more years to pay.

8.3
The incremental costs would be $90,000 (15,000X60) if a 5th flight were added. The marginal costs would be $110. The incremental costs are relevant for decision-making purposes because this would include the costs of adding an entire flight instead of one unit of output, which is impractical for an airline to adding a single passenger flight.

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