Question

You are a producer of calculators. last month, a tornado at your factory eliminated 50% of your firm's production capability. at the same time, your compensation costs increased by 5% because of an increase in healthcare costs. what is the consequence of these events?

Answer 1

As per the question 50% of the organizations production capacity has been affected due to a tornado at the premises, and a 5% increase in compensation cost have occurred due to health care, In the light of the above situation, we may conclude that a consequence due to 50% of the production facility being hampered may be a reduction in the firms profits due to reduction in sales which is directly proportionate to reduction in production, the profits may be low for a period until the manufacturing facility has been restored. The 5% increase in compensation costs will be temporary as they have occured only once.