<p>Break even is when your [economic] profits equals to zero:</p>

<p><span class="math-container">\begin{align*}
\text{Cost} &amp;= \text{Revenue}\\
N \cdot w &amp;= Q \cdot P
\end{align*}</span></p>

<p>where <span class="math-container">$N$</span> is the number of workers, <span class="math-container">$w$</span> is wages, <span class="math-container">$Q$</span> is quantity produced, and <span class="math-container">$P$</span> is price.</p>

<p>An <span class="math-container">$x$</span>% increase in productivity is the ability to hire the same amount of workers and get <span class="math-container">$x$</span>% more output.</p>

<p>Assume that <span class="math-container">$N$</span> and <span class="math-container">$P$</span> remains unchanged, a 20% increase in wages would lead to the LHS's being <span class="math-container">$L \cdot 1.2w$</span> instead. How would the RHS need to change to maintain equality?</p>

CC BY-SA 4.0
2019-12-27T06:18:54.027Z
Why does Cost= N*w ? Wage is just a part of the fixed costs. Isn't cost= Fixed Cost+ Variable costs?
maths New
CC BY-SA 4.0
2019-12-27T07:14:13.490Z
Here I'm making a simplifying assumption that labor cost is the only cost involved. It doesn't really matter whether wage is fixed cost or variable cost. The only thing that simplifies it is that wage is the only cost. The problem would get more complicated with other fixed costs, and even more complicated with other variable cost.
Art
CC BY-SA 4.0
2019-12-24T07:35:02.797Z
2019-12-24T07:35:02.797Z
Art
<p>If employees’ salaries are increased by 20%, what is the increase in productivity required <strong>to break even</strong>?</p>

<p>Can someone assist me in solving this question? </p>

<p>Productivity =  (output per period)/(number of employees)</p>

<p>How is productivity related to the employees salaries?</p>

<p>Thank you</p>

CC BY-SA 4.0
2019-12-22T09:31:29.087Z
This is at best part of a question. Without more details it is not possible to give a satisfactory answer.
Giskard
CC BY-SA 4.0
2019-12-23T14:54:58.330Z
Giskard, it is a potential case question for a consulting interview, I am supposed to ask the interviewer for any information I need to be able to answer it. The break even point varies with the fixed costs, variable cost, and price charged for each unit. How are these three variables related to the emploees salaries, or productivity?
maths New
<wages><productivity>
BreakEven/productivity/salary/employees
maths New
# BreakEven/productivity/salary/employees

(Asked by: username_0 on 2019-12-22)

If employees’ salaries are increased by 20%, what is the increase in productivity required **to break even**?

Can someone assist me in solving this question?

Productivity = (output per period)/(number of employees)

How is productivity related to the employees salaries?

Thank you

**Tags:** wages, productivity

> **Comments:**
> **username_1**: This is at best part of a question. Without more details it is not possible to give a satisfactory answer.  
> **username_0**: username_1, it is a potential case question for a consulting interview, I am supposed to ask the interviewer for any information I need to be able to answer it. The break even point varies with the fixed costs, variable cost, and price charged for each unit. How are these three variables related to the emploees salaries, or productivity?  

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## 1 answers

### Answer by username_2 on 2019-12-24. Score: 1

Break even is when your [economic] profits equals to zero:

\begin{align\*}
\text{Cost} &= \text{Revenue}\\
N \cdot w &= Q \cdot P
\end{align\*}

where $N$ is the number of workers, $w$ is wages, $Q$ is quantity produced, and $P$ is price.

An $x$% increase in productivity is the ability to hire the same amount of workers and get $x$% more output.

Assume that $N$ and $P$ remains unchanged, a 20% increase in wages would lead to the LHS's being $L \cdot 1.2w$ instead. How would the RHS need to change to maintain equality?

> **Comments:**
> **username_0**: Why does Cost= N*w ? Wage is just a part of the fixed costs. Isn't cost= Fixed Cost+ Variable costs?  
> **username_2**: Here I'm making a simplifying assumption that labor cost is the only cost involved. It doesn't really matter whether wage is fixed cost or variable cost. The only thing that simplifies it is that wage is the only cost. The problem would get more complicated with other fixed costs, and even more complicated with other variable cost.  

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