Analysis of labor costs The management of Largo Delivery Service is negotiating a new contract with its employees' union. The company has been incurring losses for the past two years and believes that it cannot continue in operation much longer unless it can cut its costs. Because labor is its most significant operating cost, it is proposing the following changes from the current contract for each employee:

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Wage rate per hour Vacation and paid holidays Pension contribution per week Guaranteed wage plan per week Training program per year .... Current $7.35 4 weeks $22.80 $16.00 $150.00 Proposed $7.00 3 weeks $20.00 $15.00 $40.00