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Joey is trying to make sure he meets the standards he has set for labour expenses at his business. He believes each product can be

Joey is trying to make sure he meets the standards he has set for labour expenses at his business. He believes each product can be built in 2.33 man-hours and each man-hour should cost $20. He is considering the following options for his six workers:

Option A- hourly wages with small bonuses

Option B- hourly wages with large bonuses

Hourly wage: $19

Hourly wage: $17

Annual hours per worker: 2,000

Annual hours per worker: 2,200

Expected production: 5,150 units

Expected production: 6,200 units

Expected product defect rate: 1%

Expected product defect rate: 2.5%

Expected performance bonuses: $0

Expected performance bonuses: $75 per 100 units`

Expected year-end bonuses: $1,000 per worker

Expected year-end bonuses: $3,000 per worker

Analyze and discuss the pros and cons of each option. Make recommendations to Joey (feel free to make other business recommendations, not limited to salary structure).

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