This year, MBB Consulting fired 5% of its employees and le

Question

This year, MBB Consulting fired 5% of its employees and left remaining employee salaries
unchanged. Sally, a first-year post-MBA consultant, noticed that that the average (arithmetic
mean) of employee salaries at MBB was 10% more after the employee headcount reduction
than before. The total salary pool allocated to employees after headcount reduction is what
percent of that before the headcount reduction?

(A) 98.5%

(B) 100.0%

(C) 102.8%

(D) 104.5%

(E) 105.0%

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(A) 98.5%
(B) 100.0%
(C) 102.8%
(D) 104.5%
(E) 105.0%

----------
Did you try this? How about +KUDOS for me?

ronr34 · Answer

I plugged in numbers...
100 employees, each earning 1$.
After the cut, 95 are left, each earning 1.1$.
1.1*95 = 104.5
100*1 = 100
This gives you the answer.

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udso · Answer

" and left remaining employee salaries unchanged" makes the question a little confusing since the salaries did indeed change.

surajitnath · Answer

I solved it as follows:
100 employees getting 1000$ avg, so total salary for 100 ppl = 100000
5% reduction in employees lead to 95 employees and a salary increase of 10% of previous avg salary 
Thus the new avg salary is = 10%(1000)+1000 = 1100
so total salary of 95 employees is 95*1100 = 104500

Now the new salary is more than previous salary by x%. x = (104500/100000)*100 = 104.5%

So the Answer is D
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GSBae · Answer

The salaries didn't change, just the average. The question didn't state that all the consultants had the same salary, therefore removing a few employees could change the average without changing the individual salaries.

KarishmaB · Answer

This question is either wrong or ambiguous. If the salary of the remaining employees in unchanged, there is no way that the average salary can increase by 10%.

When you fire employees and keep others' salaries same, your total salary pool reduces. How can it be 104.5% of the previous pool? In this case, obviously, the salary of remaining employees has increased.

Say, there were 100 employees and their average salary was $100. So total salary pool = 10,000
Now when some employees go away, the total salary pool must go down. 
What is the maximum increase possible in average salary? This will happen if the employees who were removed had very low income. Say, they earned close to $0. So the total salary pool would still be $10,000 but there would be only 95 employees. This will give an average salary of 10,000/95 = 105.26. 
So the average salary can increase by a maximum of 5.26% when 5% employees are taken away, not by 10%.

This year, MBB Consulting fired 5% of its employees and le

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