A firm wishes to shut down an office and fire 100 employees.The company will save $3000 per month per employee.It is estimated that each employee contributes $4,100 to the company.The firm rents office space for this group of employees at $1500.What should the company do?

Question

​A firm wishes to shut down an office and fire 100 employees.The company will save $3000 per month per employee.It is estimated that each employee contributes $4,100 to the company.The firm rents office space for this group of employees at $1500.What should the company do?

Quizplus · Accepted Answer

If the firm fires the 100 employees, they will save $3000 per month per employee which equals $300,000. However, each employee contributes $4,100 to the company, which amounts to $410,000. Therefore, the company will lose $110,000 if they fire the employees.
Additionally, the firm must pay $1500 for the rent of the office space. Therefore, the net loss will be $111,500. 
On the other hand, keeping the employees generates a profit of $4,100 - $3,000 - $1,500 = $600 per employee per month. Therefore, the total profit generated by the 100 employees is $60,000 per month, which is a profit of $1085 per employee per month. Therefore, it is best for the company not to fire the employees and keep the office running.

​A Firm Wishes to Shut Down an Office and Fire

A Firm Wishes to Shut Down an Office and Fire