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3. Problem Broooother & Bosss Baby, a new startup by two brothers to manufacture toys for kids, is planning to recruit workers. Preliminary forecast of
3. Problem "Broooother & Bosss Baby," a new startup by two brothers to manufacture toys for kids, is planning to recruit workers. Preliminary forecast of demand shows that an estimated 10,000 units of toys will be sold every month. It is estimated that 0.2 labor hour will be required to produce each unit of toy but 20% of the total hours will be idle time. The company has the following alternatives to pay workers: Alternative 1: Pay the workforce using piece-work system whereby workforce will be paid $2.5 per unit for the first 7000 units produced in a month and $3 per unit thereafter. Alternative 2: Pay the workforce a basic pay of $10 per hour for up to 2100 hours a month. Any hours worked in excess of the monthly standard hours will have a pay of $15 per hour. Requirements: (a) Calculate the budgeted total labor cost for: i. Alternative 1 [4 marks] Alternative 2 [6 marks] (b) In relation to your answer to (a)i, how much of the total cost is i. Direct labor cost? [2 marks] ii. Indirect labor cost? [2 marks] (c) Which method of remuneration do you prefer and why? [6 marks]
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