Recent articles in the business press have reported that many employers are treating direct labor as a true variable cost. Employees are hired and laid off regularly as the employer’s needs dictate. One article referred to this practice as “tapping and zapping employees.” Another article made reference to the new “Sust-in-time workforce.”
Required As a group, discuss whether direct labor is a fixed or a variable cost. What are the pros and cons of management treatment of direct labor as a variable cost? Are there ethical issues here?