Question

WeeBee Company has three assembly labor classifications: S-1, S-2, and S-3. The three classifications are paid $16, $19, and $22 per hour, respectively. The assembly activity for a product uses an S-2 employee who performs that task in 24 minutes. To reduce the activity cost per unit, a product engineer proposes using a higher-rated employee who can perform the assembly in 21 minutes. A manager proposes using a lower-rated employee who can perform the assembly in 30 minutes. Which of the following provides the most cost-effective solution?
A. use the S-1 employeeB. use the S-2 employeeC. use the S-3 employeeD. use either the S-1 or S-3 employee

Answer 1

Answer:

The answer is: B) use the S-2 employee

Explanation:

If you use an S-2 employee to make one unit of the product you are going to spend $7.60 [(24 min / 60 min) x $19].

If you use an S-1 employee to make one unit of the product you are going to spend $8.00 [(30 min / 60 min) x $16].

If you use an S-3 employee to make one unit of the product you are going to spend $7.70 [(21 min / 60 min) x $22].

Using an S-2 employee is the cheapest; $7.60.