When Evaluating a New Compensation System, You Notice That the Compensation

question 39

Multiple Choice

When evaluating a new compensation system, you notice that the compensation cost ratio increased, while total compensation or average earnings remained static. Which of the following is a likely explanation?

• A) All employees have received some kind of raise.
• B) Total costs and/or revenues have decreased.
• C) Benefits have been removed from total compensation.
• D) There is an error in the data; this situation is not possible.

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Definitions:

Subjective Utility

An individual's perceived value or satisfaction obtained from choosing a particular action, often used in economic and psychological models of decision making.

Expected Value

Is the predicted value of a variable, calculated as the sum of all possible values each multiplied by the probability of its occurrence.

Service Contract

A legally binding agreement between two or more parties where one agrees to provide a specified service to the other for a payment.

Peace of Mind

A state of mental and emotional tranquility, free from stress or worry.