Round up or down for amount of staff members calc.
For this PCM practice exam question, why do we have to round down to find the number of employees allowed? There are case study files adjunct to this question, the calculation at the end is what I'm trying to figure out. Thanks
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Architecture by Design, LLP decides to add new staff in the current year. However, the firm does not want to reduce net revenue per employee based on their projected budget.
How many staff members can the firm add?
_______ staff member(s)
CORRECT RESPONSE
1 staff member
CALCULATIONS
1. Prior year: $527,000 (net operating revenue) / 4 (number of existing employees) = $131,750 (net revenue per employee)
2. Current year budget: $768,500 (net operating revenue) / $131,750 (net revenue per employee) = 5.83, rounded down to 5 total employees (is this standard for this type of calculation?)
3. For the number of staff members that that can be added: 5 total employees - 4 existing employees = 1 new staff member
CASE STUDY RESOURCES USED
Scenario
Profit & Loss Statement
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If you add two new staff members, and you divide net revenue by six (instead of by five), net operating revenue per employee drops year over year…which was forbidden in the question. Of course I see no reason why you can’t hire one full time and one part time employee to maintain your revenue-per-employee, but part time option aren’t clear to me in the question so if you have to hire only full time employees, six is a no-go. Try not to memorize rules about rounding, as they will not help you that much…better to look at the concepts and limits set by individual questions, then when answering you can tell yourself “this year is a bigger pizza but the slices can’t be smaller than last year”
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