MBA 540 ASSIGNMENT LATEST-SAINT LEO
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MBA 540 Assignment Latest-Saint Leo
MBA540
MBA 540 Assignment Latest-Saint Leo
MBA540 Managerial Economics
Read the scenario provided in the text and then answer the
questions provided.
Book: Textbook: Loose leaf
edition: Brickley, J., Smith, C., & Zimmerman, J. (2016).
Managerial economics and organizational architecture (6th ed.). New York:
McGraw Hill/Irwin. Special softcover version for Saint Leo: ISBN:
978-1-308-59318-0.
Chapter 14 – “Analyzing Managerial Decisions: Structuring
Compensation Plans”
ANALYZING MANAGERIAL DECISIONS: Structuring Compensation Plans
Parkleigh Pharmacy is a small department store in Rochester, NY,
specializing in upscale, expensive personal accessories (e.g., sunglasses,
beauty aids, leather goods) and home decorations (e.g., crystal, china, table
lamps). Kaufmann’s is a large department store chain, based in Pennsylvania,
with several stores in the Rochester area. Kaufmann’s carries a broader range
of products and caters more to middle-income consumers. Salespeople at
Parkleigh are paid a straight hourly wage (i.e., no sales commissions). In
addition, they are entitled to a 30 percent discount on anything they buy at
the store. By contrast, salespeople at Kaufmann’s are paid an hourly wage
(lower than the hourly wage paid at Parkleigh) plus a commission of 5 percent
on sales they make.
1. Why do you think the compensation plans differ at the two
firms? In particular, why do you think Kaufmann’s pays commissions to
salespeople, while Parkleigh does not? Why does Parkleigh offer employees
discounts on purchases, while Kaufmann’s does not?
2. Assume, for the moment, that neither store pays sales
commissions. Parkleigh offers an hourly wage plus the employee discount.
Kaufmann’s offers only an hourly wage. Do you expect Kaufmann’s hourly wage to
be higher or lower than Parkleigh’s? Why?
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