Future Business Leaders of America (FBLA) Agribusiness Practice Test

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What is commission based on?

  1. A flat rate for service

  2. A percentage of the total sales made

  3. A fixed annual salary

  4. Employee attendance

The correct answer is: A percentage of the total sales made

Commission is typically based on a percentage of the total sales made by a salesperson or an agent. This compensation structure incentivizes individuals to increase their sales efforts because their earnings directly correlate with the sales they generate. For instance, if a salesperson sells a product for $1,000 and their commission rate is 10%, they would earn $100 in commission. This system motivates employees to perform better, as their income potential rises with their sales success. The other options do not accurately represent how commission works in sales contexts. A flat rate for service denotes a fixed fee regardless of performance, while a fixed annual salary is a predetermined amount paid without relation to sales. Employee attendance is unrelated to commission altogether, as it measures presence at work rather than sales performance. Therefore, the correct understanding hinges on the percentage-based nature of commission related to sales.

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