Question

If labor costs are 60 percent of production costs, then a 15 percent increase in wage rates would increase production costs by:________

Answer 1

If labor costs are 60 percent of production costs, then a 15 percent increase in wage rates would increase production costs by 9 percent.

What are labor costs?

• The total of all employee wages, employee benefits, and payroll taxes paid by an employer constitutes the labor costs. Direct and indirect (overhead) labor costs are separated.
• While indirect costs are related to labor costs, such as personnel who maintain industrial equipment, direct costs include wages for the employees who make a product, including those on an assembly line.
• While indirect costs are related to support labor, such as personnel who maintain industrial equipment, direct costs include wages for the employees who make a product, including those on an assembly line.
• The price of goods or services may fluctuate away from their genuine cost if labor costs are poorly allocated or evaluated, which could hurt earnings.

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