Answered: You just learned how to evaluate pay…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Question

You just learned how to evaluate pay compression systems by the following metrics: Total Compensation Expense Factor, Pay-for-Performance Expense Factor, Total Compensation Revenue Factor, and Pay-for-Performance Revenue. In the “Practice” sheet of the Excel workbook, you will find a new set of compensation, operating, and revenue data for a different company. Again, you will focus on compensation expenses associated with nonproduction employees.

Do and respond to the following:

First, compute the total compensation expense factors and total compensation revenue factors across 3 years.

Second, compute the pay-for-performance expense factors and pay-for-performance revenue factors across the same 3 years.

Third, What trends did you notice? What implications do they have?

	2016	2017	2018
Compensation Expenses (Base & Variable Pay):	38.5	41.7	40.6
*Pay-for-Performance Expenses:*	7.5	10.3	9.9
Benefits Expenses:	18.3	19.9	19.3
Total Operating Expenses:	65.6	72.7	74.0
Total Revenue:	199.1	191.9	178.7

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