If a long-term golf shop employee is replaced by an assistant who will receive higher compensation, which assumption is most reasonable?

If a long-term golf shop employee is replaced by an assistant who will receive higher compensation, which assumption is most reasonable?

• A. Profit will decline
• B. Increased sales will offset higher expenses
• C. Costs will drop
• D. Staffing costs are irrelevant

Answer: (B)

The main idea is how labor costs relate to revenue: paying a higher wage to a more capable assistant can be justified if it leads to more sales. If the assistant’s stronger service, product knowledge, and efficiency attract more customers or close more sales, the extra revenue can offset the higher compensation. In other words, increased sales offset higher expenses, keeping profit stable or even higher. It wouldn’t make sense to assume profits automatically drop, since the extra revenue could cover the higher pay. Costs wouldn’t drop because the pay is higher, and staffing costs aren’t irrelevant because they directly affect profitability.

The main idea is how labor costs relate to revenue: paying a higher wage to a more capable assistant can be justified if it leads to more sales. If the assistant’s stronger service, product knowledge, and efficiency attract more customers or close more sales, the extra revenue can offset the higher compensation. In other words, increased sales offset higher expenses, keeping profit stable or even higher. It wouldn’t make sense to assume profits automatically drop, since the extra revenue could cover the higher pay. Costs wouldn’t drop because the pay is higher, and staffing costs aren’t irrelevant because they directly affect profitability.