Part of their labor agreement states that workers shall receive one free meal per shift up to a cost of $12, with any cost over $12 being deducted from wages paid to said employee.
A labor dispute arose at the Riverside Hotel shortly after it was opened in June. Kitchen workers who ate dinner on the late shift found that their wages were reduced by $10 for each meal they consumed at the hotel during their dinner break. Josh Parker, a line cook, stated the widely held belief of the workers. There’s no way these dinners cost the Riverside Hotel $12 to make, let alone $22.This is just another case of management trying to rip us off. Take last night. I had the prime rib dinner. The piece of meat cost about $7 and the salad less than $1.That’s only $8 in total. Really, there aren’t any other costs to speak of. The cook, well, he’s going to be working in the kitchen and getting paid for eight hours whether he makes my meal or not. This claim that my meal cost $22 is baloney!”
a. List examples of costs at the Riverside Hotel that are variable, fixed, and sunk; provide an example of an opportunity cost.
b. What is the source of conflict between labor and management? What changes would you recommend in the wording of the labor agreement?