Model: Net saving in the production cost to offset losses from labour turnover
A manufacturer introduces new machinery into his factory with the result that the production per worker is increased. The workers are paid by results, and it is agreed that for every 2% increase in the average individual output, an increase of 1% on the rate of wages will be paid. At the time the machinery is installed, the selling price of the products falls by.
You are required to show the net saving in the production costs which would be required to offset the losses expected form the reduced turnover and bonus paid to workers.
Additional data:
|
First period |
Second period |
|
|
No. of workers |
350 |
250 |
|
No. of articles produced |
16,800 |
14,000 |
|
Wages paid |
Rs. 33,600 |
|
|
Total sales |
Rs. 75,600 |
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