Cho & Greenwood, a management consulting firm, analyzes its own pay structure an

Question

Cho & Greenwood, a management consulting firm, analyzes its own pay structure and finds that the average pay for junior associates is $60,000. The pay range that the firm set for this position is $50,000 to $72,000. Which of the following statements is true about the compa-ratio for this position?

A.The compa-ratio is $60,000/$72,000, or less than 1.

B.The compa-ratio is $60,000/$61,000, or slightly less than 1.

C.The compa-ratio is $60,000/$122,000, or much less than 1.

D.The compa-ratio is $61,000/$60,000, or slightly more than 1.

E.The compa-ratio is $72,000/$60,000, or greater than 1.

In most organizations, only a small fraction of the employees are executives, yet employees and others often consider executive pay when evaluating the equity of a company’s pay structure. Which of the following statements is a reason why executive pay draws this attention?

Explanation / Answer

1. The answer is given below:

Compa Ratio = Salary / Range Midpoint

B.The compa-ratio is $60,000/$61,000, or slightly less than 1.   

The salary is 60,000 and the mid-range is $50,000 to $72,000 which is 61000 or slightly less than 1.

2.The answer is given below:

Executive pay ranges tend to be very close to the pay levels of the other employees.

The executive pay does not vary as that would be close to the other employees due to equality.

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