12.2 Matthew Smith knows his talented people are the reason for the success of ElectroMag. Smith has noticed that the costs of medical and dental benefits are escalating, and he needs to control them. With 800 employees, the firm’s profitability is threatened. He has three options: (1) eliminate health benefits,

(2) try to find a cheaper plan that covers fewer medical and dental procedures, or (3) withhold a fixed amount of each person’s salary to use to fund the benefits. Which option would you recommend he choose?