Question

An assembly line can produce 90 units per hour. The line's hourly cost (total salaries of workers) is $4,248 an hour (the first 8 hours). Workers are guaranteed a minimum of 6 hours (i.e., they will be paid for 6 hours per day, even if they work less than 6 hours). There is a 50% premium for overtime (i.e., salary is increased 50% during overtime hours), however, productivity for overtime drops by 8% (i.e, the number of units produced per hour drops 8%). What is the total costs if 967 units needs to be produced? Margin of error: +/-10 (answers within range [x-10, x+10], where x is the true answer, are considered correct).

Answer 1

Production in first 8 hours will be = 90 x 8 = 720 units

cost for producing 720 units will be $ 4248 x 8 = 33984.

Now balance production required will be = 967 - 720 = 247 units.

Production rate per hour after overtime will be = 90 x 92% = 82.80 units. (Productivity drops by 8% because of overtime)

Hourly cost of manpower will increase by 50% i.e. 4248 x 150% = 6372.

So additional cost for producing 247 units will be = (247 / 82.80) x 6372 = 19008.26

Hence total cost = 33984 + 19008.26 = $ 52992.26

Answer: $52992.26