Question

Rick needs to hire a new employee. Current projections indicate that the department will generate $5 million USD in gross revenue. Rick is expected to maintain a 25% annual profit margin. Current projected expenses for the year are $3,850,000. For budgeting purposes, the actual cost of an employee is assumed to be twice the employee’s annual salary. Based on his budget and current projections, what is the maximum salary Rick can offer a new employee?

Answer 1

The maximum salary that Rick can offer a new employee based on the budgeted and current projections is $93.750.

What is a budget projection?

A budget projection is qualitative and quantitative data developed for making a long-term prediction of estimated future financial results.

Data and Calculations:

Projected gross revenue = $5 million

The annual profit margin on cost = 25%

Annual profit in dollars = $962,500 ($3,850,000 x 25%)

Projected expenses for the year = $3,850,000

Actual cost of an employee = $187,500 ($5,000,000 - $3,850,000 - $962,500)

The expected maximum salary for the new employee = $93,750 ($187,500/2)

Thus, Rick cannot avoid offering a new employee more than $93,750 if he must maintain a 25% annual profit margin on cost.

Learn more about budget projections at brainly.com/question/24940564

#SPJ1