If a company invests in production improvement option D that will boost labor productivity by 50%, while its annual depreciation costs will rise by an amount equal to 10% of the investment costs associated with installing option D, it is accurate to say that its labor costs per pair produced will decline

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03-12-2020
Business

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If a company invests in production improvement option D that will boost labor productivity by 50%, while its annual depreciation costs will rise by an amount equal to 10% of the investment costs associated with installing option D, it is accurate to say that its labor costs per pair produced will decline

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topeadeniran2 topeadeniran2 · Answer 1 · 2020-12-11T09:58:09+01:00

Answer: from $8.00 per pair to $5.33 for a production facility in North America that currently has labor productivity of 5000 pairs per worker and total regular compensation (which does not include overtime pay) of $40,000 annually.

Explanation:

Since we have been informed that the labor productivity be boosted by 50%, since the production facility in North America currently has labor productivity of 5000, then the new labor productivity will be:

= 5000 (1 + 50%)

= 5000 (1 + 0.5)

= 5000 (1.5)

= 7500

Also, since total regular compensation was given s $40,000 annually, the labor cost will then be:

= 40,000 / 7500

= $5.33