You have two employees who report directly to you. One is making $36,000/year and the second is making $24,000/year. You feel the second employee has done outstanding work, and you want to give her a $3,000/year raise. The company has limited you to a total increase in payroll of 5% for next year. How much of a raise can you afford to give to the first employee if you give the second employee a $3,000/year raise?

Zero,( no raise at all)

Explanation:

The total labor cost for the two employees is

=$36,000 + $24,000

=$60,000

If only 5% of increases in payroll is approved, the actual increase

=5/100 x $60,000

=0.05 x $60,000

=$3,000

If the second employee is to get a raise of $3,000 per year, then the first employee will not get any raise.

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