Question:
Straight commission compensation plan may lead to accumulation of ________.
Straight commission compensation plan may lead to accumulation of ________.
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Think about what happens when sales people push credit sales to earn more commission and some buyers never pay.
Updated On: Oct 19, 2026
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Solution and Explanation
Step 1: Recall the plan.
Under the straight commission plan, a sales person earns only a commission on the sales he makes. He gets no fixed salary.
Step 2: See how it affects behaviour.
More sales mean more commission. So the sales person tries to raise the number of sales at any cost.
He may sell on credit even to customers who are not creditworthy.
Step 3: Find the result.
Many of these credit customers fail to pay. The firm then carries a pile of unpaid dues.
This is called accumulation of bad debts.
Step 4: Note other weaknesses.
The plan also gives no income security and may push high pressure selling. But the textbook names bad debts as the effect of credit sales to unworthy customers.
Final Answer:
Straight commission may lead to accumulation of bad debts.
Under the straight commission plan, a sales person earns only a commission on the sales he makes. He gets no fixed salary.
Step 2: See how it affects behaviour.
More sales mean more commission. So the sales person tries to raise the number of sales at any cost.
He may sell on credit even to customers who are not creditworthy.
Step 3: Find the result.
Many of these credit customers fail to pay. The firm then carries a pile of unpaid dues.
This is called accumulation of bad debts.
Step 4: Note other weaknesses.
The plan also gives no income security and may push high pressure selling. But the textbook names bad debts as the effect of credit sales to unworthy customers.
Final Answer:
Straight commission may lead to accumulation of bad debts.
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