Question

Fill out the tables for each scenario and answer the question that follows. Use $7.25 as the minimum wage and remember that employees in the United States must be paid time-and-a-half (1.5 times the normal hourly rate) for each hour worked over 40 hours per week

Answer 1

Answer:

• see below for the table values
• US labor cost: $115275 per year

Step-by-step explanation:

The labor charge is for (6 days/week). In Mongolia, the charge per laborer is then ...

  (6 days/week)($1.10/day) = $6.60/week

The three laborers working 50 weeks/year will have a labor cost of ...

  (3 laborers)($6.60/week/laborer)(50 weeks/year) = $990/year

__

In the US, the labor charge per person per week is ...

  (14 hr/day)(6 day/week) = 84 hr/week

That's 40 hours of straight pay and 44 hours of overtime pay, or ...

  7.25(40 +1.5(44)) = 7.25(106) = 768.50

For 150 person-weeks per year, the total US labor charge is ...

  ($768.50/person/week)(3 persons)(50 weeks/year) = $115,275/year

__

The materials cost for a year is ...

  ($50/rug)(12 rugs/year) = $600/year

__

The revenue is ...

  ($2000/rug)(12 rugs/year) = $24,000/year

Profit is the difference between revenue and the total of costs:

  profit = $24,000 -($990 +600 +10000) = $12410 . . . made in Mongolia

__

So, the table gets filled as follows:

  (labor, material, fixed cost, revenue, profit)

Mongolian-made

  ($990, $600, $10000, $24000, $12410)

US-made

  ($115275, $600, $10000, $24000, -$101,875)

The US labor cost would be $115,275.

_____

Comment

For the given selling price, the break-even labor cost is about $1.06 per hour (on average). At US labor rates, the break-even selling price is about $10,490 per rug.