# BreakEven/productivity/salary/employees

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

• This is at best part of a question. Without more details it is not possible to give a satisfactory answer. – Giskard Dec 22 '19 at 9:31
• 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 Dec 23 '19 at 14:54

\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?