Jackson Consulting reduced headcount by laying off 20% of its employee

Question

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

Source: Marty Murray

(A) 15
(B) 16
(C) 20
(D) 25
(E) 40

Source: Marty Murray

chetan2u · Answer

hi, since we are looking to maximize the average with no change in earnings.. Let all the layed off employees were ding Social service :wink:

that is they were working without any pay.. so if all 100%,say 100 earlier were earning 100 with average = 1.. Now 80% are earning 100 so average = 100/80 = 1.25.. increase = 1.25-1= .25 % = .25/1*100 = 25% D

kill3rlook5 · Answer

Let employees before layoff be 100 earning 1 Unit per employee.
After layoff number of employees =80 (Still earning 100 units)
Hence earning per employee = 100/80=5/4
5/4=1*(1/4)

1/4 is the increase and it corresponds to 25% increase.

Hence answer is  D

JeffTargetTestPrep · Answer

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

MsInvBanker · Answer

That's exactly how I did it. As in total earning is 100 and the people working for it are 80.

luisdicampo · Answer

Deconstructing the Question

The company lays off   20\%   of employees, so   80\%   remain.

The earnings of the remaining employees do not change.

To maximize the increase in average earnings, we assume the laid-off employees had the lowest possible earnings.

Step-by-step

Let the initial number of employees be   N   and total earnings be   S  .

Initial average is

\frac{S}{N}

After layoffs, the number of employees is

0.8N

To maximize the average, assume the laid-off employees contributed no earnings, so total earnings remain

S

New average is

\frac{S}{0.8N} = \frac{1}{0.8} \cdot \frac{S}{N} = 1.25 \cdot \frac{S}{N}

Thus the average increases by

25\%

Answer: D

pappal · Answer

let no of employees and average earning per employee be e and a respectively (before layoff).
after 20% layoff no. of employees=0.8e and let average earning be a1.
as given total earnings remained same.
so a*e=0.8e*a1
a1/a=10/8
subtracting 1 from both sides
(a1-a)/a =2/8=1/4=25% is the increase in the average earnings
D

Jackson Consulting reduced headcount by laying off 20% of its employee

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Jackson Consulting reduced headcount by laying off 20% of its employee

Prep Toolkit

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