PLOS Limited foresees a shortage of material supply. As a result, the company will deliver only 20,000 units in the second and third quarters of 2023. The company will be able to meet the scheduled delivery for the rest of the contract year. The downturn in production will significantly deteriorate the company’s profitability, so the management is considering a permanent downsizing of its labor force. A layoff will save $200,000 in salary expenses annually but will reduce the firm’s production capacity to 70% in the following year (from Q2-2024 to Q1-2025). The annual contract size will also be reduced to 70% of the current amount.

Should the company downsize its labor force or not.

Answer rating: 100% (QA)

To determine whether PLOS Limited should downsize its labor force we need to compare the costs and b... View the full answer