As the Human Resources manager for Beautiful Bottles Pty Ltd, a company manufacturing bottles for the food industry, you have been asked by the accountant to help reduce the product costs of each bottle. You have compiled the following information to help with the decision.

You are considering two options. The first option is to replace one of the senior production staff with a junior production staff member. This option will reduce the amount of quality control checks that the company can perform. The second option is not to replace two of the junior production staff when they resign. This will reduce the number of bottles that can be produced by 600 000 bottles per year.
Required

(a) Explain what some of the qualitative factors are that may arise from each of the two options being considered and whether these may favour one option over the other.

(b) Calculate the Direct Labour cost per bottle under the current conditions and each of the two proposed options.

(c) Using the qualitative factors from requirement

(a) and the quantitative factors from requirement

(b) explain which option you would consider the best for Beautiful Bottles Pty Ltd.

Transcribed Image Text:

Number of bottles produced each year Production supervisor's salary Senior production staff wages (2 staff @ $140 000 each) Production staff wages (10 staff @ $80 000 each) 6 600 000 $240 000 $280 000 $800 000