MartyMurray wrote:
Jackson Consulting reduced headcount by laying off 20% of its employees. If the earnings of each of the remaining employees were the same before and after the layoffs, what is the maximum percentage by which the average earnings of the employees at the company could have increased from its level before the layoffs to its level after the layoffs?
(A) 15
(B) 16
(C) 20
(D) 25
(E) 40
We can assume that before the layoffs, Jackson Consulting (JC) has 10 employees and each is paid, on average, $100. Thus, the total payroll would be 10 x 100 = $1000. Since JC lays off 20% of its employees, it lays off 2 employees and we have 8 employees left. To maintain the total payroll of $1000, each of the 8 employees, on average, would be paid 1000/8 = $125.
We see that the average employee earnings of $125 after the layoffs is 25% more than the average employee earnings of $100 before the layoffs.
Answer: D
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