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Econ 02 Productivity 1.(5) vocab: Capital resources Natural resources Productivity Human resources Investment in capital goods BUSINESS DECISIONS IN THE T-SHIRT COMPANY Part 1: Tarica Ramirez, president and founder of the in 16 weeks. If they can fill this order, they have a T-Rrific T's Company, is facing a decision that will commitment from the customer for additional affect the future of the company. T-Rrific T's orders of 20,000 every four months. Ramirez started two years ago in Ramirez's basement, knows the company cannot handle this order with where she designed and hand painted colorful T- the current number of workers. She calls for a shirts. Two things make the T-Rrific T's popular: meeting with the manager, Tom Chen, to discuss no two designs are exactly alike and each design the options they have. has the company logo-TRT-hidden in the design. Part 2: The shirts sold quickly in a local market, and Chen is delighted to have a chance to share she hired some friends to help produce more shirts information he has been gathering on new to keep up with the demand. Demand kept computer graphics and printing machinery. With growing and over the past year she has hired a few two computers and four printing machines, they more workers and moved into an old warehouse. can produce 2000 shirts a week. However, he also Three local business people bought stock in the knows this means laying off part of their work company to provide the funds needed to expand. force, since they would need only two computer The firm currently has one designer, six painters to operators and four packers with the machinery. reproduce the designs (with slight variations on Chen knows Ramirez will want to consider all each shirt), and two packers who ship the shirts to possibilities, so he gathers information on other area stores. These workers can produce 400 shirts options. Here is the information Chen has so far. a week, working 40 hours a week. Help Chen complete this chart to present to his The shirts currently sell for $20 each. boss. T-Rrific T's has just received an order for 20,000 shirts on the condition they be completed OPTIONS: #1: Keep current employment; turn down the order. #2: Add sufficient painters and designers to fill the order; hire 3 additional designers, 19 additional painters, and 2 additional packers; this work force will be able to produce 1250 shirts/week. #3: Lease machinery that will reproduce the current process and increase productivity; reduce employment by one half of current force; this combination will be able to produce 2000 shirts/week. The cost to run the machines will be $185 per hour (cost of leasing, maintenance, and utilities). WORKERS NEEDED Parkers Current Option 1 Option 2 Athit Workers 25 Econ 02 pg 1 2. (1) WAGES (with payroll taxes and benefits): Designers $15/hir Computer Designers (Option 3) $20/hr. Painters $12/hir. Packers $10/hr. Total labor cost per hour (wages of all workers for one hour) # Shirts per hour Current/Option I $107.00 10.00 shirts Option 2 31.25 shirts Option 3 $ 80.00 30.00 shirts 3. (6) PRODUCTION COSTS: (Calculate the labor costs per shirt; divide Col. 1 above by Col. 2) Labor/shirt Other Labor: S/hr Cost of 1 bel cost/shirt (Total) (#shirts/hr) Materials/shirt (Machines/Utilities) Option 1 $107 $4.00 $3.00 Option 2 $400 $4.00 $3,00 Option 3 S 80 $4.00 $8.70 TOTAL COST OF PRODUCTION PER SHIRT; (Add cost per hour of labor, materials, and other-machines, utilities, etc.) Option 1: Option 2: Option 3: 4. (1) Based on the production costs per shirt, which option would you recommend? 5. (3) How would that decision affect current workers? Would any new people be hired? 6. (2) What might happen to the company in the long run if they choose Option 1 (turning down the large order)? 7. (5) Besides laying off some workers, are there other negative factors related to choosing Option 3? Do the positive factors outweigh any negatives? Why or why not? (Be sure to think about long run impacts as well as immediate impacts.) 3. (6) Which decision do you think would be supported by the following groups? Management Stockholders Current workers Community leaders Unemployed people in the community Consumers 9. (6) Explain how each of the vocab words fits in this decision
