Exercise 2, Continued Page 4 Situation Owners expect a 10% Return on Equity The management team at Your Company has decided that they are understaffec to properly build these 9 different projects and deliver the $35.4M Revenue. How much ADDITIONAL Overhead can we take \& still hit their 10% ROE profit? GPCS-NeededGPC$=$AvailableformoreOH What is the current Overhead Ratio? How much NEW Overhead can we afford and stay within 10.0% OH Ratio? (RSX.10)OH=AvailableNEWOverhead The management team has decided to increase OH to the 10.0% point. After attending the Texas State Career Fair, they have a list of graduates and will offer each a salary of $65,000+ benefits package that sums to a 23% Burden. How many Texas State graduates can we hire and stay within 10%OH Ratio? SalaryXBurden=TotalCost/Employee(TC/E)65,0001.23=79,950AvailNewOHTC/E=#Peoplewecanhire115,000/79,950=1OR1NewHires How many Texas State graduates can we hire and still hit our 15\% ROE Proft? AvailMoreOH /TC/E= Total New Hires Exercise 2, Continued Page 4 Situation Owners expect a 10% Return on Equity The management team at Your Company has decided that they are understaffec to properly build these 9 different projects and deliver the $35.4M Revenue. How much ADDITIONAL Overhead can we take \& still hit their 10% ROE profit? GPCS-NeededGPC$=$AvailableformoreOH What is the current Overhead Ratio? How much NEW Overhead can we afford and stay within 10.0% OH Ratio? (RSX.10)OH=AvailableNEWOverhead The management team has decided to increase OH to the 10.0% point. After attending the Texas State Career Fair, they have a list of graduates and will offer each a salary of $65,000+ benefits package that sums to a 23% Burden. How many Texas State graduates can we hire and stay within 10%OH Ratio? SalaryXBurden=TotalCost/Employee(TC/E)65,0001.23=79,950AvailNewOHTC/E=#Peoplewecanhire115,000/79,950=1OR1NewHires How many Texas State graduates can we hire and still hit our 15\% ROE Proft? AvailMoreOH /TC/E= Total New Hires