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Sat 2 Apr, 2005 07:22 am
A company gives a choice of two plans to the union negotiator for an increase in Salary.
The First option is an initial salary of $20,000 to be increased after each 12 months by $500.
The second option is an initial salary of $20,000 to be increased after each six months by $125.The salary is to be calculated every six months.
Can you advice the union negotiator which plan he should recommend to his members?
I choose Option 1 ...
The Mensa Pack is saying option 2 :
Option 1 ($500 Increase after each 12 months)
First Yr $10,000 + $10,000 = $ 20,000
Second Yr $10,250 + $10,250 = $20,500
Third Yr $10,500 + $10,500 = $21,000
Fourth Yr $10,750 +$10750 = $21,500
Second Option ($125 increase after each six months )
First Yr $10,000 +$10,125 =$20,125
Second Yr $10,250 + $10,375 =$20,625
Third Yr $10,500 +$ 10,625 = $21,125
Fourth Yr $10,750 + $10,875 = $21,625
__________________________________________________________
Why after one year and presumably 12 months has passed, there is no $500 increase added to the base salary of $20,000?
Help ME
It is; the $500 raise comes at the end of each year, just as the $125 raise comes at the end of each 6 month period.
However, to really determine the better option, look at the total wage over the contracts four years. In option 1, a worker earns $83,000 over the 4 years (20+20.5+21+21.5) where in option 2 a worker earns $83,500 (10+10.125+10.25+10.375+10.5+10.625+10.75+10.875) over the 4 years.
In addition to the higher earnings at the end of the contract.
Rap
Should it not be
First Yr $10,000 + $10,000 = $ 20,000 ($20500) ??
Second Yr $10,250 + $10,250 = $20,500
($10,500)
No the raise comes at the end of the year, so the first year is $10K+&10K, then the $500 raise is given.
Rap
Let's break it down:
First Yr $10,000 + $10,000 = $ 20,000 --> increase = 0
= (time elapsed: 0-6 months) $0 + (time elapsed: 6-12months) $0
$0 bonus after 12 months
12 months = 1 year.
You started paying them the $500 only after 24 months has passed:
Second Yr $10,250 + $10,250 = $20,500 --> increase = 500
=(time elapsed: 12-18 months) $250 + (time elapsed: 18-24 months) $250 = $500
That $500 was paid after a period of 24 months elapsed. Am I wrong?
yepper.
The $500 raise only comes during the 12 to 24 month period. (total increase in pay at the end of 24 months is 1*$500=$500.
Rap
so is this misleading ?
The First option is an initial salary of $20,000 to be increased after each 12 months by $500.
No different than having to work for one year before you get your vacation. The first $500.00 is paid in the 2nd year.
The salary is the rate at which the money is earned.
If you drive for an hour at 50 miles per hour, then increase your speed (rate) to 60 miles per hour, you won't have suddenly gone 60 miles. It will take another hour for you to go 60 miles at the new speed (rate).
In this problem, the rate changes at the end of each year. The benefit of that change is realised during the following year.
Thanks all for the help ....
Mensa is wrong on this one.
Option 1 is calculated correctly, but option 2 is not. Note that the annual salary is increased by $125 every six months, not the semiannual payment (otherwise the second year payments in Option 1 should each be $10,500, not $10,250.)
In the first year of option 2, the salary is increased by $125 after 6 months, so the second payment is half of the new annual salary of $20,125, or $10,062.50.
At the end of the first year, another $125 is added to the annual salary making it $20,250. The first payment in the second year is therefore $20,250/2 = $10,125. The second payment in the second year is $20,375/2 = $10,187.50.
First year $10,000 + $10,062.50 = $20,062.50
Second year $10,125 + $10,187.50 = $20,312.50
Third year $10,250 + $10,312.50 = $20,562.50
Fourth year $10,375 + $10,437.50 = $20,812.50
Option 1 is the best.
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