011 Vehicle Salespeople – Compensation and Other
Expenses
Variable Selling
Synopsis
All compensation including commissions, “spiffs”, prizes, and other payments paid to sales personnel are properly recorded in Account 011, Vehicle Salespeople – Compensation and Other. Not included is absentee pay for vacation nor compensation for attending training classes. Absentee wages are recorded in Account 024, Absentee Compensation .
Debits |
Credits |
a. The Mark of Excellence program b GM Performance Rewards c. GM Performance Rewards Bonus
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Example 1
Record the accrual of salespersons commissions at month-end in the amount of $75,000 of which $48,000 is for the New Vehicle Department and $27,000 is for the Used Vehicle Department.
Journal: Payroll and General Journal
Entry: |
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Debit |
Credit |
Account 011-01 |
Vehicle Salespeople Compensation & Other – New Vehicles Department |
$48,000 |
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Account 011-02 |
Vehicle Salespeople Compensation & Other – Used Vehicles Department |
$27,000 |
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Account 321 |
Salaries, Wages & Commissions Payable |
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$75,000 |
Distribution of Expenses
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Departmental Distribution |
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011 Vehicle Salespeople - Compensation & Other |
New Veh. |
Used Veh. |
Lease & Rental |
Mechanical |
Body Shop |
Parts & Access. |
Gen & Admin. |
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01 |
02 |
03 |
05 |
06 |
07 |
09 |
Salespeople’s commissions |
For new Vehicle sales |
For used Vehicle sales |
For leases and rentals |
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Commissions and fees to outsiders |
For new Vehicle sales |
For used Vehicle sales |
For leases and rentals |
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Salaries and guarantees |
Time |
Time |
Time |
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Prized and premiums |
For new Vehicle sales |
For used Vehicle sales |
For leases and rentals |
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Commission earned by a supervisor for selling a vehicle |
Total Commission |
Total Commission |
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Commission for selling other auto-motive items not installed on vehicles sold |
For new other automotive sales |
For used other automotive sales |
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Comments
The “Pay Plan” for salespeople should be simple and provide built in incentives for generating higher levels of gross profit and volume. It should be competitive with respect to other dealerships in the area in order to attract talented personnel. Once a successful Pay Plan is developed, it should not be changed unless there are compelling reasons. Frequent changes to the Pay Plan have a demoralizing effect on the sales staff.
At the end of each month, the balance of this account should be analyzed by calculating the Compensation paid per vehicle and the balance should be compared to the total gross profit of the New and Used Vehicle Departments. Total Sales Compensation should not exceed 30% of the department’s gross profit otherwise an operating loss is a likely result.