Under normal circumstances, an employee normally produces 10 units of product B in an hour. The employees are paid $7.00 per hour. Management is considering a change in the work method to increase in productivity. In particular, the new method should reduce the time required by 30%. If the employees agree to adopt the new method, the employees will paid additional $2.00 per hour.

Required:

What would be the effect on `per unit cost of the new system as compared to the oldsystem.

Q2 : 50 employees in the factory are paid at a basic rate of $5.50 for a 35 hour week. Overtime is paid at a rate of $7.50 per hour. It takes one employee 3 hours to produce one unit of the sole product. On average employees work 4 hours of overtime in a week. Management are considering automating part of the production process which will reduce unit production cost by 30 minutes. It is expected that overtime will not be needed under the system.

Required:

What would be the effect on cost per unit of the new system as compared to the oldsystem.