MGMT 4186 Minimum Wage Assignment It is 2021. The US government has passed a new federal minimum wage of $11,00 / hour. It will go into effect on January 1, 2022. Please follow the instructions, given the background information in items A,B,C, and D below. Please follow the Instructions below 1. Calculate the immediate financial impact in 2021 of the increase (change) in hourly wages. This increase will immediately affect the profitability of the company due to the impending increase in the minimum wage. Ignore tax issues such as employment tax in your calculation. 2. Identify at least three (3) courses of action (options) for the owner of this company that will offset the increase in labor costs from inl above. Explain why you think these options are viable options for the small company. Your course of action must quickly offset the effect of the increase in wages and the decrease in profitability of the company due to the minimum wage increase. 3. Lastly, recommend the one course of action from among your list of three courses of action that you think is the best option for the mall business owner and his or her company. Justify your response, with at least two different advantages and two different disadvantages. Background Information A- The company has 19 employees, which includes two assistant managers. The owner is the only shareholder of the company. B. 6 employees earn $8,00 hour which is slightly above the current federal minimum wage. but $3/ per hour below the new federal minimum wage. C. The other employees earn the following as of 2021: ii. 6 carn S13/ hour iii. 3 earn $18/ hour iv. 2 earn $22/ hour v. The 2 managers cach earn $50,000 per year vi. The current total cost of labor is $548,000. See Table 1 on the next page. D. The company is organized as an LLC. It earned a profit last year of $123,000 based on sales of $1,300,000. Net income was divided up as $20,000 in retained eamings and $103,000 as the owner's draw. The owner earns their entire family's income from their draw from the net B. 6 employees eam S8.00 / hour which is slightly above the current federal minimum wage, but $3/ per hour below the new federal minimum wage. C. The other employees earn the following as of 2021: ii. 6 earn $13/ hour iii. 3 carn $18/ hour iv. 2 earn S22/ hour v. The 2 managers each carn $50,000 per year vi. The current total cost of labor is $548,000. See Table 1 on the next page: D. The company is organized as an LLC. It earned a profit last year of $123,000 based on sales of $1,300,000. Net income was divided up as $20,000 in retained earnings and $103,000 as the owner's draw. The owner earns their entire family's income from their draw from the net income of the business. They family owns a home and they have a mortgage (loan). E. The owner's spouse does not work and the family cannot iustify the spouse getting a job of any kind because the wages from a new job would not cover the weekly cost of day care and after school care for the family's three young children, ages 2,4 , and 7 . F. So, do not propose that the spouse work. Day care is incredibly expensive for a family with three children. Also, it would be nearly impossible for the owner to absorb the entire increase in labor costs due to largely fixed family expenditures (e.g, it is not possible to simply stop paying the mortgage on a house). Table 1. Summary of Current Costs of Labor DELETE EVERYTHING ABOVE THESE THREE SENTENCES AND ANSWER THE THREE QUESTIONS FROM PAGE 1 IN THE SPACE ON PAGE 3 BELOW, ADD SPACE BELOW AS NEEDED TO RESPOND TO EACH ITEM. RENAME THE FILE lastname_Minimum Wagedoc. DO NOT TURN IN ANYTHING OTHER THAN AN MS WORD DOCUMENT. DELETE EVERYTHING ABOVE THESE THREE SENTENCES AND ANSWER THE THREE QUESTIONS FROM PAGE 1 IN THE SPACE ON PAGE 3 BELOW. ADD SPACE BELOW AS NEEDED TO RESPOND TO EACH ITEM. RENAME THE FILE lastname_Minimum Wage.doc. DO NOT TURN IN ANYTHING OTHER THAN AN MS WORD DOCUMENT
