Local 635 represents kitchen workers at hotels in several Florida cities. Part of their labor agreement states that workers "shall receive one free meal per shift up to a cost of $8, with any cost over $8 being deducted from wages paid to said employee." A labor dispute arose at the DeCarlos Hotel shortly after it was opened in June. Kitchen workers who ate dinner on the late shift found that their wages were reduced by $7 for each meal they consumed at the hotel during their dinner break. Josh Parker, a line cook, stated the widely-held belief of the workers, "There's no way these dinners cost the hotel $8 to make, let alone $15. This is just another case of management trying to rip us off. Take last night. I had the prime rib dinner. The piece of meat cost at most $5 and the salad less than $1. That's only $6 in total. Really, there aren't any other costs to speak of. The cook, well he's going to be working in the kitchen and getting paid for 8 hours whether he makes my meal or not. This claim that my meal cost $15 is BS!" Management of the DeCarlos Hotel sees the situation differently. Take the case of Josh's dinner. In presenting the hotel's case to a labor arbitration board, Sandy Ross, manager of the hotel explained, "Look, that dinner goes for $25 on the menu, so assigning a cost of $15 represents a very good value to the kitchen workers. The contention that the meal only cost $6 is nonsense. True, the ingredients may cost $6, but there are also the labor costs related to preparing the meal and numerous overhead costs like the cost of the oven that the prime rib is cooked in. That oven cost more than $18,000. And, there's heat, light, power, etc. Each meal we prepare should be assigned part of these overhead costs. And don't forget that, when the worker finishes his or her meal, someone has to clean up. That costs money too. When you add up all these items, a prime rib dinner easily adds up to $15!" Required a. Explain the source of conflict between labor and management. b. Assume you are the arbitration board hearings officer. What would your decision be? Why? Management of the DeCarlos Hotel sees the situation differently. Take the case of Josh's dinner. In presenting the hotel's case to a labor arbitration board, Sandy Ross, manager of the hotel explained, "Look, that dinner goes for $25 on the menu, so assigning a cost of $15 represents a very good value to the kitchen workers. The contention that the meal only cost $6 is nonsense. True, the ingredients may cost $6, but there are also the labor costs related to preparing the meal and numerous overhead costs like the cost of the oven that the prime rib is cooked in. That oven cost more than $18,000. And, there's heat, light, power, etc. Each meal we prepare should be assigned part of these overhead costs. And don't forget that, when the worker finishes his or her meal, someone has to clean up. That costs money too. When you add up all these items, a prime rib dinner easily adds up to $15!" Required a. Explain the source of conflict between labor and management. b. Assume you are the arbitration board hearings officer. What would your decision be? Why? C. What changes would you recommend in the wording of the labor agreement? Support your suggestion. a In preparing your response, give examples of and explain different types of costs at the DeCarlos Hotel, for example: variable, fixed, sunk, etc., based on your understanding of these terms in a managerial accounting concept. For example, a variable cost is not simply a cost that can vary; it must vary certain manner. Provide an example of an opportunity cost, with an explanation as to why it is an opportunity cost
