Review the following case study and answer the question that

Review the following case study and answer the question that follows. Duringthe planning process for starting a gift shop in a local resort townyou began to question and consider different compensation plans for theretail clerks. It was fairly standard in the area to pay retail clerks$6.25 an hour. However, as you visited gift shops that were paying theserather low wages you noticed that the clerks simply took orders and didnot sell or try to answer any questions for customers. In a visit to agift shop in Ft. Lauderdale last spring you struck up a conversationwith the owner. She was more than willing to share her experiences aboutretail clerks. In fact, after a lot of trial and error she decided topay upper-quartile compensation. This consisted of a base wage of $9.50an hour and a 3 percent commission on all sales. She mentioned that whenshe went to this type of system her average transaction size increasedby 20 percent and that closure went from 28 percent to 40 percent. Moreimportantly, she found that her bottom line profit rose by 32 percent.In short, by paying more for retail clerks she increased employeeproductivity and the profits of her store. For the gift shop youare planning you initially estimated that traffic would be 30,000visitors annually and that closure would be 24 percent. You estimatedyour average transaction size at $32. Your gross margin percent would be60 percent and fixed operating expenses would be $60,000 annually.Variable operating expenses would be 20 percent of sales. Under thisplan you would pay two full-time clerks $6.25 an hour and you wouldfill-in when things got busy. Your new plan, which you want toevaluate, calls for paying the clerks $9 per hour plus 4 percentcommission on all sales. Thus, your fixed operating expenses would go upby $3,000 and variable operating expenses would rise to 24 percent ofsales. You believe that closure would rise to 32 percent and averagetransaction size would rise to $36.  Basedon the impact each compensation strategy has on the net profit of thebusiness, which one should you pursue? Illustrate your work, to includethe net profit calculations of each strategy.Must be in APA format. Please cite any outside sources if used.

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