A Salary Schedule with a Bonus Payment
Supposethatasalespersonreceivesasalaryaccordingtoacontractthatestablishes a relationship between pay and the level of sales made by the salesperson. In particular,supposethatthecontractstipulatesthatthesalesperson’smonthlysalary will be composed of three parts: (i) a basic amount of $800, (ii) a commission of 10%, and (iii) a lump-sum bonus of $500 if the salesperson’s sales for the month reach or exceed $20,000. From this description, one can see that her salary will jump by $500 if the critical level of $20,000 worth of sales is achieved. This implies a discontinuity in her salary schedule. Letting S represent sales per month and P represent the salesperson’s pay for the month, it follows that the function describing her salary-sales relationship is