Discuss Worldatwork C8 Exam Topic 3 Question 82

If a company has a higher percentage of employees with fixed compensation than variable compensation, what happens as revenues increase?

ACompensation costs eventually stabilize and become a consistent percent of revenue.

BCompensation costs and revenue increase at approximately the same rate.

CCompensation costs eventually decrease as a percent of revenue, increasing profit growth.

DCompensation costs remain the same as a percent of revenue until variable compensation costs exceed fixed compensation costs.

Suggested Answer: C

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35 comments · newest first

Chun 11 months ago

D sounds right, fixed costs won't change until variable kicks in.

Glory 11 months ago

Not sure about C, seems too optimistic.

Renato 11 months ago

Wait, does that mean profits could actually grow faster?

Shawana 12 months ago

I think B makes more sense, costs and revenue should align.

Bettye 12 months ago

A higher fixed cost means stability in compensation.

Antione 1 year ago

I recall that fixed costs don’t change much, so maybe D is correct since it mentions variable costs exceeding fixed ones. That seems to align with what we studied.

Odette 1 year ago

I’m a bit confused about how fixed versus variable compensation plays out in terms of profit growth. C sounds plausible, but I’m not entirely confident.

Ben 1 year ago

I think I practiced a question like this where we looked at how variable compensation impacts costs as revenues rise. It feels like B might be the right choice.

Helga 1 year ago

I remember discussing how fixed compensation can lead to stable costs, but I'm not sure if that means they stabilize as a percent of revenue.

Halina 1 year ago

This seems straightforward to me. If the company has more fixed compensation than variable, then as revenues increase, the fixed costs will become a smaller and smaller percentage of the total, so the compensation costs will stabilize as a percent of revenue. I'm confident option A is the correct answer.

Mertie 1 year ago

I'm a bit confused by this question. I'm not sure I fully understand the relationship between fixed and variable compensation and how that would impact the company's costs as revenues increase. I'll need to think this through more carefully.

Derrick 1 year ago

Okay, I think I've got this. If the company has more fixed compensation than variable, then as revenues increase, the fixed costs will become a smaller percentage of the total, so the compensation costs will decrease as a percent of revenue. I'm going with option C.

Gwen 1 year ago

Hmm, this is a tricky one. I'm not entirely sure how to approach it, but I'll try to reason through the options and see if I can eliminate any that don't make sense.

Elsa 1 year ago

I think this question is testing our understanding of how compensation structures affect a company's costs as revenues increase. I'll need to think through the different types of compensation and how they would impact the overall compensation costs.

Aja 2 years ago

The correct answer is definitely C. As a finance major, I can tell you that this is a classic concept in managerial accounting. Gotta love those fixed vs. variable costs!

Dacia 2 years ago

C seems like the most logical answer here. The fixed compensation costs will become a smaller percentage of the total revenue as the company grows, so profit margins should improve.

Lachelle 2 years ago

↳ replying to Dacia

Exactly, it's all about managing costs as the company scales.

Pamella 2 years ago

↳ replying to Dacia

So, as revenue increases, profit margins should improve.

Jospeh 2 years ago

↳ replying to Dacia

That makes sense, as the company grows, fixed costs should become a smaller percentage of revenue.

Gearldine 2 years ago

↳ replying to Dacia

I agree, C does seem like the most logical answer.

Hillary 2 years ago

I'm not sure, but I think the answer might be D.

Magda 2 years ago

Haha, this question is a real brain-teaser! I'm going to go with C, but I wouldn't be surprised if the answer is actually 'all of the above' and the exam is just trying to trick us.

Dan 2 years ago

↳ replying to Magda

I agree with both of you. It's definitely a tricky question, but I think the key is to consider how fixed and variable compensation costs would change as revenues increase.

Anthony 2 years ago

↳ replying to Magda

I'm leaning towards A, because I believe that compensation costs should eventually stabilize and become a consistent percent of revenue as the company grows.

Tarra 2 years ago

↳ replying to Magda

I think you might be onto something with C. It makes sense that as revenues increase, fixed compensation costs would eventually decrease as a percent of revenue.

Virgina 2 years ago

I'm not sure about this one. I was thinking B might be correct, but now I'm leaning towards D after reading the options again.

Helga 2 years ago

↳ replying to Virgina

Let's consider all options before making a decision.

Nickole 2 years ago

↳ replying to Virgina

I'm not sure, but D seems like a possible outcome.

Merilyn 2 years ago

↳ replying to Virgina

I disagree, I believe C is the best option.

Kaitlyn 2 years ago

↳ replying to Virgina

I think A is the correct answer.

Lisha 2 years ago

I disagree, I believe the answer is A.

Gladys 2 years ago

I think the answer is C.

Jerlene 2 years ago

I think the correct answer is C. As revenues increase, the fixed compensation costs will become a smaller percentage of the total revenue, leading to increased profit growth.

Cristina 2 years ago

↳ replying to Jerlene

That makes sense, it would lead to increased profit growth.

Eura 2 years ago

↳ replying to Jerlene

I agree, as revenues increase, fixed compensation costs decrease as a percent of revenue.

Worldatwork c8 Exam - Topic 3 Question 82 Discussion