Calculate the lh075 cost for each month in the first quarter

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Reference no: EM133348432

Question: As part of his cost-reduction efforts, Lockden is interested in reducing labor costs. He asks you to evaluate the financial impact of a proposal involving an alternative labor contract for manual finishing labor (LH075). Under the proposed contract, the company would guarantee a 40-hour workweek for these employees. The hourly wage under the guaranteed 40-hour workweek would be $14 instead of $15. Based on the number of LH075 employees that the company plans to employ, this means that the company is committed to paying its LH075 employees for 1,600 hours each month, even if there is not enough work to keep them busy. If the number of LH075 labor hours per month is higher than 1,600 hours, LH075 employees will receive time-and-a-half overtime pay. LB075 labor hours will not be impacted.

To fulfil Lockden's request, first, insert a new worksheet at the end of the Excel template and set up a new direct labor budget (only for LH075). Then, answer the following questions:

a. Calculate the LH075 cost for each month in the first quarter and the total cost for the first quarter under the proposed labor contract.

b. If Lockden's primary objective is cost reduction, would you recommend the proposed labor contract?

c. What other factors besides cost minimization should be considered in evaluating each option?

d. Given the uncertainties looming over 2020, which option (the existing labor arrangement or the proposed scenario) would you recommend? Explain why.

Reference no: EM133348432

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