Question

3. Problem "Broooother & Bosss Baby," a new startup by two brothers to manufacture toys for kids, is planning to recruit workers. Preliminary forecast of demand shows that an estimated 10,000 units of toys will be sold every month. It is estimated that 0.2 labor hour will be required to produce each unit of toy but 20% of the total hours will be idle time. The company has the following alternatives to pay workers: . Alternative 1: Pay the workforce using piece-work system whereby workforce will be paid $2.5 per unit for the first 7000 units produced in a month and $3 per unit thereafter. Alternative 2: Pay the workforce a basic pay of $10 per hour for up to 2100 hours a month. Any hours worked in excess of the monthly standard hours will have a pay of $15 per hour. .

Answer 1

1. Labour Turnover Ratio :

Labour Turnover	=	No. of Employees Leaving / Average no. of employees * 100
		3/13.5 = 22%
Average No. of employees	=	(Beginning no. of employees+Closing no. of employees)/2
		(15+12)/2 = 13.5

2. Labour Efficiency Ratio :

Standard Hours for Actual Output / Actual Hours for Actual Output

Standard Hours Per Unit = 0.2

Actual Output = 10500

Standard Hours for Actual Output = 10500*0.2 = 2100

Actual Hours = 2600

Labour Efficiency Ratio = 2100 / 2600 = 80.77%

3. Labour Capacity Ratio :

Actual Hours Worked / Total Budgeted Hours * 100

= 2600/2000* 100 = 130%

Total Budgeted Hours = Budgeted Output * Budgeted Hours Per Unit = 10000*0.2

= 2000

4. Labour Production Volume = Standard Hours / Budgeted Hours = 2100/2000 = 105%