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Chapter 14: Structuring Compensation Plans Parkleigh Pharmacy is an upscale department store in Rochester, NY, who sells personal accessories and home decorations. Kaufmann’s is a departmental store based in Pennsylvania and has several stores in Rochester, NY. Kaufmann carries broad range of products and caters middle class customers. Salesperson at Parkleigh are paid a straight hourly wage (e. g,. no sales commission) and 30% discount from purchase any product from Parkleigh’s store. Salesperson at Kaufmann gets an hourly wage which is lower than Parkleigh’s hourly wage but gets 5% commission on sales. However, salesperson doesn’t get any discount on product they buy from Kaufmann. Based on the above situation answer the following questions: 1. Why does the compensation plan differ at the two firms? Explain why does Kaufmann pay sales commission and Parkleigh doesn’t?Why does Parkleigh provide discount and Kaufmann doesn’t? 2. Suppose, neither of the firms pay sales commission. Parkleigh provides an hourly wage plus employee discount and Kaufmann provides an hourly wage without any employee discount. Do you expect Kaufmann’s hourly wage to be higher or lower than Parkleigh’s? Why?

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Chapter 14: Structuring Compensation Plans Parkleigh Pharmacy is an upscale department store in Roch...

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