Salespeople typically call on each client once every two weeks to ensure everything is going well with the service. to clean the equipment as needed, and to replenish supplies. Salespeople drive a CanDo van, which they must keep stocked appropriately from their local CanDo warehouse. CanDo operates with a very healthy margin of profit, as it is essentially providing a turnkey service to its clientswho are quite willing to pay well for avoiding the bother of performing this task. Levita has become convinced that she must address the following problem. It seems that because of differing travel requirements for salespersons' routes. varying distances from salespersonsr homes to the local CanDo warehouse. differences in the nature of the facilities of clients {site layout, ease of access. etc}. and variation in the number of break rooms in each facility that must be serviced, a growing feeling of inequity is being experienced by the CanDo sales force. The salespeople are paid on a combination of salary and commission. and the commission is based on the profitability of each sales territory. Fixed and variable costs associated with the territory are allocated to arrive at the profit component. And to complicate things more, there is also a potential for a bonus component based on signing up new customers. 111is compensation mix is not the problem: the problem is effectiver arriving at the territory profit figure monthly so that commission payments are fair and equitable across the different client situations and travel requirements. In the past. the bottom-line prot has been calculated using a contribution margin approach with indirect costs allocated on the basis of overall sales volume of the territory as a percentage of total sales. Levita certainly realizes this is potentially problematic and has recently been reading up on activity-based costing as one way of dealing with issues such as this. She calls a meeting with the two sales managers, Ryan Roan and Fernando Perez, to discuss how they might restructure the calculations of the profit component of the salesperson incentive plan