5. As part of his cost-reduction efforts, Lockden is interested in reducing labor costs. He asks...
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5. As part of his cost-reduction efforts, Lockden is interested in reducing labor costs. He asks you to evaluate the financial impact of a proposal involving an alternative labor contract for manual finishing labor (LH075). Under the proposed contract, the company would guarantee a 40-hour workweek for these employees. The hourly wage under the guaranteed 40-hour workweek would be $14 instead of $15. Based on the number of LH075 employees that the company plans to employ, this means that the company is committed to paying its LH075 employees for 1,600 hours each month, even if there is not enough work to keep them busy. If the number of LH075 labor hours per month is higher than 1,600 hours, LH075 employees will receive time-and-a-half overtime pay. LB075 (type of direct labor) labor hours will not be impacted. To fulfil Lockden's request, first, insert a new worksheet at the end of the Excel template and set up a new direct labor budget (only for LH075). Then, answer the following questions: a. Calculate the LH075 cost for each month in the first quarter and the total cost for the first quarter under the proposed labor contract. b. If Lockden's primary objective is cost reduction, would you recommend the proposed labor contract? 5. As part of his cost-reduction efforts, Lockden is interested in reducing labor costs. He asks you to evaluate the financial impact of a proposal involving an alternative labor contract for manual finishing labor (LH075). Under the proposed contract, the company would guarantee a 40-hour workweek for these employees. The hourly wage under the guaranteed 40-hour workweek would be $14 instead of $15. Based on the number of LH075 employees that the company plans to employ, this means that the company is committed to paying its LH075 employees for 1,600 hours each month, even if there is not enough work to keep them busy. If the number of LH075 labor hours per month is higher than 1,600 hours, LH075 employees will receive time-and-a-half overtime pay. LB075 (type of direct labor) labor hours will not be impacted. To fulfil Lockden's request, first, insert a new worksheet at the end of the Excel template and set up a new direct labor budget (only for LH075). Then, answer the following questions: a. Calculate the LH075 cost for each month in the first quarter and the total cost for the first quarter under the proposed labor contract. b. If Lockden's primary objective is cost reduction, would you recommend the proposed labor contract?
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Auditing Assurance Services and Ethics in Australia an Integrated Approach
ISBN: 978-1442539365
9th edition
Authors: Alvin A Arens, Peter J. Best, Greg Shailer, Brenton Fiedler
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