EFI—a material handling company—pays each of its salespersons a base salary plus a percentage of revenues generated. To reduce overhead, EFI has switched from giving each salesperson a company car to reimbursing them $0.35 for each business-related mile driven. Accounting records show that, on average, each salesperson drives 100 business-related miles per day, 240 days per year. Can you think of an alternative way to restructure the compensation of EFI’s sales force that could potentially enhance profits? Explain

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Accounting and Economic Profit analysis

One comes across the concept of Profits in the context of business and in analyzing the results of business activity. Profits of a business can be accounting profits, and they can also be economic profits. So how does one understand the concept of accounting versus economic profits?