Crunch the numbers!

Calculating the Costs of Increasing the Total Compensation Budget at Butcher Enterprises

Butcher Enterprises has experienced substantial employee turnover among its office workers. During exit interviews, more than 80 percent stated that low pay was the top reason for resigning. The company con- ducted a survey of local companies’ pay practices to confirm whether this concern is valid. Indeed, Butcher Enterprises’ average hourly pay rate for total compensation falls well below the market. The compensation survey showed an average hourly rate of $23 for total compensation. Of this amount, wages are $16 per hour and benefits are $7 per hour. In comparison, Butcher Enterprises spends an average hourly rate of $19 for total compensation. Of this amount, 70 percent is allocated for wages.

Questions:

1-7. On an average hourly basis, how much does Butcher Enterprises spend on wages and benefits, respectively, in dollars?

1-8. How much does the company spend on wages and benefits over the course of one year for 100 office workers? Assume that each worker provides 2,080 hours of service each year.

1-9. How much additional money does the company need to match the market rates for this group of 100 employees?