Group Incentives (SIA, adapted) The Smart Company of Hong Kong operates with five direct workers in its stamping department. All work is done on a job-order basis. During the week of August 15, each man worked a full 40-hour week, with output as follows:

GUARANTEED HOURLY UNITS NAME MINIMUM PRODUCED Brackett, S. J. $1.50 1,840 Emery, P. L. 1.60 1,900 Evans, E. C. 1250 1,960 Forest, T. A. 1.70 2,050 Simmons, F. 1.50 1,650 . Compute the gross earnings of each worker, assuming that a group incentive plan is in operation and that the standard output of the department is 7,200 units per week. Each member of the group receives the guaranteed hourly minimum if production is equal to or less than the standard output. The hourly rate for each worker is increased | percent for each 200 units per week in excess of standard production.
. What effect does excess of “normal” or “standard” output have on the unit cost of production? Explain.
. Assess the effectiveness of this incentive system for the Smart Company, giving reasons for your answer. lop5