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:

Fixed Costs

Costs that do not vary with the level of production or sales, remaining constant regardless of the scale of operations.